Unlike project risk, country risk cannot be incorporated into the capital budgeting analysis of a proposed project by adjustment of the discount rate or by adjustment of the estimated cash flows.

Question

Quizplus · Accepted Answer

Country risk is not related to the specific project and cannot be adjusted through the project's estimated cash flows or discount rate. It is a broader economic and political risk associated with the country in which the project is located.

Unlike Project Risk, Country Risk Cannot Be Incorporated into the Capital