Define political risk into the capital budgeting process, Financial Management

Assignment Help:

How would you incorporate political risk into the capital budgeting process of foreign investment projects?

One method is to adjust the cost of capital upward to imitate political risk and discount the supposed future cash flows at a higher rate. On the other hand, one can subtract insurance premium for political risk from the expected future cash flows and make use of the usual cost of capital that is applied to domestic capital budgeting.


Related Discussions:- Define political risk into the capital budgeting process

Explain dual currency bond, Explain Dual Currency Bond A dual currency ...

Explain Dual Currency Bond A dual currency bond is a straight fixed-rate bond that is issued in one currency and pays coupon interest in that similar currency.  At maturity, th

Calculation of weighted average cost of capital, Calculation of weighted av...

Calculation of weighted average cost of capital (WACC) Market values Market value of equity = 5m × 4.50 = $22.5 million Market value of preference shares = 2.5m × .0762 =

Show the accounting profit criteria, Q. Show the Accounting Profit Criteria...

Q. Show the Accounting Profit Criteria? Accounting Profit Criteria: - Under accounting profit criteria there is merely one method for making capital expenditure decisions. This

Question, You deposit $500 today in a savings account that pays 3.5% intere...

You deposit $500 today in a savings account that pays 3.5% interest, compounded annually. How much will your account be worth at the end of 25 years?

Expalin the term mutual funds, Mutual funds Mutual funds pool resources...

Mutual funds Mutual funds pool resources from a lot of individuals and companies and invest these resources in diversified portfolios of bonds, stocks and money market instrume

Monte carlo simulation model, Monte Carlo Simulation Model Monte Carlo...

Monte Carlo Simulation Model Monte Carlo simulation is used to analyse to what extent the valuation of the chosen company is dependent on the assumptions. Monte Carlo simulati

Basic concepts of assessing trading strategies, Leveraging can be described...

Leveraging can be described as an investing principle where borrowed funds are invested in a part of the securities. Leveraging can magnify either returns o

International financial system, International financial system has always b...

International financial system has always been a debatable and crucial focus of the world discussion and it is mainly due to the repression of the economies especially after the cu

Valuing an option-free bond, To value an option-free bond, we must de...

To value an option-free bond, we must determine the on-the-run yield curve for the particular issuer whose bond we have to value. This on-the-run yield curve used

Free cash flow, Free Cash Flow Free cash flow presents the amount of ca...

Free Cash Flow Free cash flow presents the amount of cash generated by the existing operations of a corporation and that is not needed for reinvestment in new projects in the f

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd