What are the two main sources of risk in domestic capital budgeting as discussed in the chapter on Corporate Risk Management?

The two main sources of risk in domestic capital budgeting are demand risk and operational risk. Demand risk arises from fluctuations in product or service demand influenced by competition and economic conditions. Operational risk pertains to cost overruns related to the firm's operations, which can be managed through effective accounting systems.

Demand risk involves uncertainties in the demand for a firm's products or services, which can be affected by external factors such as competition and economic health. Operational risk, on the other hand, relates to the internal management of production costs, where cost overruns can significantly impact cash flows. Both types of risk are critical for firms to manage effectively in their capital budgeting processes.