Risk and cost of Potential Kidnapping During a conflict in the Middle East, some MNCs capitalized on opportunities to rebuild the damaged areas. However, some of their employees were kidnapped by local militant groups. How should an MNC account for this potential risk when it considers direct foreign investment (DFI) in any particular country? Should it avoid DFI in any country in which such an event could occur? If so, how would it screen the countries to determine which countries have acceptable risk? For whatever countries the MNC is willing to consider, should it adjust its feasibility analysis to account for the possibility of kidnapping? Should it attach a cost to reflect this possibility or increase the discount rate when estimating the net present value? Explain.
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