The risk of expropriation can usually be handled in a capital budgeting analysis by assuming that expropriation risk affects expected future cash flows, but not investors' required return.

Question

Quizplus · Accepted Answer

The statement is generally true, as expropriation risk can be factored into expected future cash flows when conducting a capital budgeting analysis, but it typically does not directly affect investors' required return on investment. However, in certain cases where expropriation risk is high, investors may demand a higher required return to compensate for the added risk.

The Risk of Expropriation Can Usually Be Handled in a Capital