Emerging Markets...awwwww

Ok guys I am sure everybody is really loving this section, but honestly we can probably assume that this will be tested… So I thought we could open a discussion to help anybody out… Please feel free to add any related thoughts…I will start… I just watched the schweser video on this and the dude said, above anything else be able to justify why a analyst would adjust the CF’s over discount rate when valuing companies with inflation problems… he mentioned that if he were are examiner (with real shifty eyes…very suspicious…) that what he would be sure to ask what would be reasons to adjust CF’s over Discount Rates…here are the reasons… Four arguments for adjusting CFs: 1. Country risks are diversifiable therefore should not be included in the cost of capital under MPT 2. Companies respond differently to country risk, they each have different risk attributes 3. Country risk is one-sided risk – down side! 4. Identifying cash flow effects helps the portfolio manager understand risks in the fundamentals