Country risk represents the potentially adverse impact of a countrys 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:

• Identify the common factors used by MNCs to measure country.
• Explain how to measure country risk.
• Explain how MNCs use the assessment of country risk when making financial decisions.
• Explain how MNCs can prevent host government takeovers.