According to the CAPM,systematic risk is the only relevant risk for capital budgeting purposes.

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The CAPM (Capital Asset Pricing Model) assumes that systematic risk, measured by beta, is the only relevant risk for determining the cost of capital and evaluating investment opportunities. This is because diversifiable or unsystematic risk can be eliminated through proper diversification, while systematic risk affects the overall market and cannot be diversified away. Therefore, the CAPM suggests that expected returns on investments should be related to their level of systematic risk.

According to the CAPM,systematic Risk Is the Only Relevant Risk