Understanding Financial Management A Practical Guide
Three general perspectives for evaluating risk in capital budgeting are a single project, a company, and a shareholders' perspective. The single project perspective assesses an investment's total risk as a stand alone unit. The company perspective considers each project according to its contribution to the firm's total risk. This perspective focuses on diversification and portfolio effects. The shareholders' perspective views each project according to its contribution to the riskiness of a diversified shareholder's portfolio. This perspective focuses on market risk.