Systematic and Unsystematic Risk

We discuss risk, returns, and opportunity cost in our class in week five because risk, returns, and opportunity cost impact capital budgets. In Section 4.2 of chapter four, the authors discuss the difference between cash, debt, and equities. The authors review cash, debt, and equity because capital projects are funded with cash, debt, and equities. For instance, when we calculated the Weighted-Average Cost of Capital in week two, we learned about cash, debt, and equity returns. At this time, I ask everyone to review Figure 11.1 in Section 11.2 of chapter eleven. What did you find exciting or troubling when reviewing Figure 11.1? After reviewing Figure 11.1, do you have a new perspective or view about capital budgeting?