Exhibit 16.1 presents a varicty of country-risk ratings for five different countries, including Indonesia, the home country of P.T. Semen Gresik. Utilizing the data presented in this exhibit, compare it with the results of estimating a discount rate of only \(14.084 \%\).

a. What would the data in Exhibit 16.1 lead you to believe about investing in Indonesia?

b. How would you-when confronted in a capital allocation committee meeting explain the rather contradictory ratings versus discount rate:

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Exhibit 16.1 Country Risk Ratings for Selected Countries Risk Ratings Currency: Unit Indonesia Finland Brazil Russia Mexico rapiah curo real ruble peso Arrangement floating EMU floating managed float floating S&P's Rating CCC AA B- SD BB Moody's Rating B3 Aaa B2 B3 B2 Firch IBCA B- AAA B CCC BB Economist Intelligence Unit: Rating D B D D C Score 67 35 62 79 53 Euromoney Rank 88 12 76 161 47 Score 36.4 90.9 41.7 20.9 55.2 Institutional Investor: Rank 86 14 65 104 49 Score 27.9 82.2 37.4 20.0 46.0 Trend Negative Positive Negative Negative Positive International Country Risk Guide: Political 42.0 90.0 66.0 54.0 69.0 Financial 22.0 39.0 31.5 25.5 31.0 Economic 18.0 45.5 33.0 18.5 35.0 Milken Institute Capital Access Index: Score 37.8 61.65 57.81 61.65 Quantitative 56.6 52.38 71.15 52.38 Risk measures 26.3 29.41 43.59 31.25 Qualitative 0.0 36.36 31.03 34.76 Overseas Private Investment Corporation Yes No Yes Yes No Adapted by authors from the sources listed. All values for March 1999.