Compare and contrast the differing methods that can be used to account for risk within the context of financial managers analyzing the viability of project investments.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Compare and contrast the differing methods that can be used to account for risk within the context of
Investment project is referred to as the set of an inter-dependent tasks as well as activities, which used to undertaken through the corporation for achieving the financial goals or defined economic. An investment projects used to include the information for the goal of planned investment, criteria, funding, expenditure regarding the implementation, and also methods for an assessment of the risks as well as effectiveness of the desired effects as well as investment process.
Risk assessment is defined as an overall method or process, where it used to identify the hazards as well as risk factors for having the potential for causing the harm, analyzing as well as evaluating an associated risk with the hazard, and also determining an appropriate method for eliminating the hazard, and control the risk if the hazard cannot be eliminate the hazard.
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