Define Country risk and Incorporate into capital budgeting. Explain elaborately

Define Country risk and Incorporate into capital budgeting. Explain elaborately

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Expert Solution

Country risk means that various risk which are associated with the management of company which can lead to default on various sovereign bonds and other decrease in the value of payables due to inflation risk and interest rate risk along with exchange rate risk.

Those projects which are to be undertaken into another country must be factoring country rate risk because they will be providing with a fair Idea whether to invest into different projects or not because the exposure into other country would be discounted through country risk whether it is to incorporate the political risk of another country or it is to incorporate the socio economic risk for inflation and interest risk of another country

sho, the discounting rate which is to be adopted during various capital budgeting products are needed to factor in this country risk so that could be fair representation of selection and rejection of various project.

jeff jeffy answered 1 year ago

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