Question

LoRusso Industries has considerable operations in Indonesia, producing component electronic parts. LoRusso's Indonesian operation has been very successful, but the firm is now concerned about its host country preventing LoRusso from repatriating a majority of the profits.

Which type of multinational capital budgeting risk is being illustrated by LoRusso's situation?

A) Exchange-rate risk
B) Political risk
C) Stand-alone risk
D) Market risk
E) Corporate risk

Answer 1

The type of multinational capital budgeting risk being illustrated by LoRusso's situation is political risk.

Step-by-step explanation:

The type of multinational capital budgeting risk being illustrated by LoRusso's situation is Political risk. Political risk refers to the potential impact of political actions or changes in a host country that can affect the operations, profitability, and ability to repatriate profits of a multinational corporation. In this case, LoRusso Industries is concerned that its host country, Indonesia, may prevent the majority of its profits from being repatriated.