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ABC corp runs a large plant in Nebraska and just finished a risk assessment
ABC corp runs a large plant in Nebraska and just finished a risk assessment.The company just announced that in any given year, there is a 2% chance the plant has an accidental breakdown that lasts for 2weeks. This probability of 2% is an upward revision of the prior assessment of a 1% chance). How will announcement affect ABC's cost of capital? (assume the CAPM is how investors set the cost of capital).
it will decrease
it will increase
it will not affect it
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