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Portfolio theory makes it possible to incorporate Risk into capital budgeting through risk adjusted returns. However, portfolio theory omits an important element of risk that is relevant in capital budgeting. That missing element is:
Political Stability
A condition where a government is stable, capable of maintaining order, and there is an absence of political turmoil or frequent government change.
Internal Political Strife
Conflict among members within the same organization or group, often hindering progress or decision-making.
Global Marketplace
An international system for the exchange of goods, services, and capital across world markets, where businesses operate and compete on a worldwide scale.
Direct Investment
An investment made to acquire a lasting interest in or effective control over an enterprise in another country.
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