Since diversifiable risks are not priced into the cost of capital,executives can ignore such risks.

Question

Quizplus · Accepted Answer

Although undiversifiable risks affecting all companies are the risks that are priced into the cost of capital, executives cannot ignore unique risks that any particular company faces, as those risks can clearly destroy shareholder value. For example, a firm needs to do the best it can to retain top talent, as there may be a negative impact on firm cash flows if they take jobs at other firms.

Since Diversifiable Risks Are Not Priced into the Cost of Capital,executives