How Can Entrepreneurs Use CAPM for Decision-Making?
1. Evaluating New Projects: Entrepreneurs can use CAPM to assess the potential returns of new projects in comparison to their risk. This can help in prioritizing projects that offer a favorable risk-return balance. 2. Attracting Investors: By demonstrating a solid understanding of CAPM, entrepreneurs can present a compelling case to potential investors about the expected return on their investment relative to the risk. 3. Risk Management: CAPM aids in identifying projects that might be too risky compared to the expected returns, allowing entrepreneurs to avoid ventures that do not align with their risk tolerance.