Risk is in the eyes of the beholder

A privately owned firm will generally end up with a higher discount rate for a project than would an otherwise similar publicly traded firm with diversified investors.

Market Risk: Market risk refers to the unanticipated changes in project cashflows created by changes in interest rates, inflation rates and the economy that affect all firms, though to differing degrees.

Does this provide a rationale for why a private firm may be acquired by a publicly traded firm?

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