Hi everybody...Can somebody tell me if it is necessary to use country risk premium while calculating cost of equity if the company's entire operation is in home country and all the other companies in the sector also operate in the home country only

Question

Hi everybody...Can somebody tell me if it is necessary to use country risk premium while calculating cost of equity if the company's entire operation is in home country and all the other companies in the sector also operate  in the home country only

anonymous · Answer

Definitely. If you are operating in a  country then you are exposed to this country risk and you need to add a country risk premium if the default risk of this country is not zero.