. Country risk: Ford Motor Company maintains production facilities in many different countries including Brazil, Taiwan, and the United States. Given the data in Exhibit 21.6, which production plant is likely to face the greatest country risk? How does country risk affect a firm's capital budgeting decisions?

21.3 International Capital Budgeting 689 23 EXHIBIT 21.6 Composite Country Risk Ratings for Selected Countries in 2012 The composite risk for a country includes the country's political risk, financial risk, and economic risk. A higher number means ower risk. Are you surprised at the rank of the United States? Rank Country Composite Risk Rank Country Composite Risk 1 Norway 90.5 Australia 77.5 2 Brunei 87.8 26 United States 76.5 3 Luxembourg 87.5 Libya 75.5 Switzerland 87.3 United Kingdom 74.8 Singapore 86.8 Poland 74.3 Sweden 84.0 China, Peoples' Rep. 74.0 Oman 83.5 Israel 72.3 United Arab Emirates 82.8 France 71.8 Germany 82.5 Russia 71.3 Canada 82.3 Mexico 71.0 Hong Kong 82.0 Brazil 70.8 Taiwan 81.3 Italy 70.8 Qatar 81.0 Hungary 67.3 Saudi Arabia 81.0 Spain 66.0 Denmark 80.8 India 64.3 New Zealand 80.3 114 Greece 61.0 Japan 80.0 114 61.0 Kuwait 79.8 121 59.5 19 Finland 79.3 133 Syria 54.0 Korea, Republic 79.0 140 Somalia 41.3 omposite risk consists of (1) political risk. (2) financial risk, and (3) economic risk. Rankings range from 1 (low risk) to 140 (high risk). urce: PRS Group (www.prsgroup.com). January 24, 2014. Reprinted with permission. Turkey Iraq 18 20