Diversifiable political risks should be included only in expected future cash flows and not in the required return on foreign investment.

Question

Quizplus · Accepted Answer

Diversifiable political risks can be reduced through diversification of investment portfolio, and therefore should not affect the required return on foreign investment. However, they should be considered in the expected future cash flows as they can have an impact on the company's earnings and profitability.

Diversifiable Political Risks Should Be Included Only in Expected Future