Investment Decision-Making: Project Betas
Interactive

Investment Decision-Making: Project Betas

Intuition Publishing
Updated Sep 24, 2020

Project betas account for project risk by discounting future cash flows using a modified version of the capital asset pricing model (CAPM). If the resultant project net present value is positive, the project should be accepted; if negative, the project should be rejected. Here we examine the project beta formula, the decision rules for project betas, and the relationship between project betas and internal rate of return.