Question

8.   Expropriation of assets by foreign country governments is an example of:

1. mild form of political risk
2. severe form of political risk
3. severe form of country risk

4.         The relevant cash flows to use in foreign project valuation, when capital markets are segmented, are

            a.         incremental worldwide project cash flows

b.         cashflows discounted by interest rates in the respective countries

            c.         total worldwide cash flows generated by the project

2.         In sensitivity analysis of foreign projects what matters is the ___________ cash flows generated by the project before you can use different scenarios.

1. incremental
2. base-case
3. parent

1.         The ___________ represents the probability that governments and corporations may default on their foreign currency debt obligations.

1. Political risk
2. Country risk
3. Sovereign risk

           

Answer 1

Expropriation of asset by foreign country Govt. is severe form of political risk (Answer)

The relevant cash flows to use in foreign project valuation, when capital markets are segmented, are total worldwide cash flows generated by the project (c) (Answer)

In sensitivity analysis of foreign projects what matters is the base case cash flows generated by the project before you can use different scenarios. (b) (Answer)

The Sovereign Risk represents the probability that governments and corporations may default on their foreign currency debt obligations. (c) (Answer)