Objectives and Learning Outcomes:

Country risk represents the potentially adverse impact of a country’s environment on a multinational corporation (MNC)’s cash flows. An MNC conducts country risk analysis when it applies capital budgeting to determine whether to implement a new project or whether to continue conducting business in a particular country. This project helps you understand how to measure country risk and incorporate country risk to achieve the maximization of firm value.

Instruction:

Read Chapter 16 and course slides carefully and make a “one-page single-spaced report.” Make sure that your report includes the detailed discussion of the following subjects.

• Explain how MNCs use the assessment of country risk when making financial decisions.