Reading 41: Valuation in Emerging Markets-LOS c 习题精选 2011, political, discount, emerging, account

土豆妮

Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 41: Valuation in Emerging Markets

LOS c: Discuss the arguments for adjusting cash flows, rather than adjusting the discount rate, to account for emerging market risks (e.g., inflation, macroeconomic volatility, capital control, and political risk) in a scenario analysis.

 

 

Which of the following is NOT an argument for adjusting cash flows to account for emerging market risks rather than adjusting the discount rate?

A) Many factors directly affect cash flows.

B) Country risk is a one-sided risk.

C) Country risk is not diversifiable.

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The four arguments that support adjustments to cash flow rather than adjusting the discount rate are:

• Country risks are diversifiable.
• Many factors directly affect cash flows.
• Companies respond differently to country risk.
• Country risk is one-sided risk.

土豆妮

The best way to incorporate country risk into emerging market company valuations is by adjusting the:

A) cash flows.

B) risk-free rate.

C) discount rate.

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Evidence suggests that country risks can be best captured by adjusting cash flows in a scenario analysis rather than including them into the discount rate.  The four arguments that support adjustments to cash flow rather than adjusting the discount rate are:> >

• Country risks are diversifiable.> >

• Many factors directly affect cash flows.> >

• Companies respond differently to country risk.> >

• Country risk is one-sided risk.> >

土豆妮

Which is not an appropriate step in adjusting for emerging market risks?

A) Estimate cash flows for a series of scenarios.

B) Estimate a market price using probability-weighted scenario analysis.

C) Increase the discount rate.

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Evidence suggests country risks are better captured by adjusting cash flows to account for emerging market risks rather than adjusting the discount rate. Analysts should estimate cash flows for a series of scenarios and then estimate a market price using probability-weighted scenario analysis.