When determining whether a particular proposed project in a foreign country is feasible:
A) a country risk rating can adequately substitute for a capital budgeting analysis.
B) country risk analysis should be incorporated within the capital budgeting analysis.
C) the effect of country risk on sales revenue is more important than the effect on cash flows.
D) the project with the highest country risk rating (lowest country risk) should be accepted.
E) B and D

Question

Quizplus · Accepted Answer

Incorporating country risk analysis within the capital budgeting analysis is crucial when determining the feasibility of a proposed project in a foreign country. This is because country risk can significantly impact the project's cash flows and thus, its overall profitability. A country risk rating alone cannot substitute for a thorough capital budgeting analysis as it does not consider the specific details and characteristics of the project. Therefore, options A, C, and D are incorrect, and option E is partially correct but not the best choice.

When Determining Whether a Particular Proposed Project in a Foreign