When we compute the cost of equity capital for a project we assume that the ________ of the project is equivalent to the average market risk of the firm's investments.
A) diversifiable risk
B) market risk
C) unsystematic risk
D) volatility

Question

Quizplus · Accepted Answer

The cost of equity capital is based on the market risk of the project, not the diversifiable risk or unsystematic risk. Volatility is related to market risk but not the specific metric used in computing the cost of equity capital.

When We Compute the Cost of Equity Capital for a Project