According to the text, the most appropriate method of incorporating country risk into capital budgeting analysis is to:

Question

According to the text, the most appropriate method of incorporating country risk into capital budgeting analysis is to:​

Quizplus · Accepted Answer

The most appropriate method of incorporating country risk into capital budgeting analysis is to estimate the effect of each form of country risk on cash flows. This method takes into account the impact of country risk on the actual cash flows of the project, which is the most relevant factor in capital budgeting. Adjusting the discount rate alone (Option D) may not fully account for the impact of country risk on cash flows, and comparing country risk to a benchmark level (Option A) may not provide enough information about the specific impact of the risk on the project's financials. Estimating the impact on the income statement and balance sheet (Option C) could be useful, but the impact on cash flows is the primary concern.

According to the Text, the Most Appropriate Method of Incorporating