Country risk should be incorporated into the international capital budgeting analysis by

Question

Quizplus · Accepted Answer

Country risk can greatly impact the expected return on a project and should thus be reflected in the discount rate used in the analysis. This provides a more accurate representation of the risk involved and allows for better decision-making. While increasing cash flow estimates may also be a consideration, it alone does not address the additional risk involved. Doing nothing would be ignoring an important aspect of the analysis and could lead to poor decision-making.

Country Risk Should Be Incorporated into the International Capital Budgeting