Question

I am valuing a Syrian firm using a current country risk premium (CRP) of 5% (which is the mid point between Lebanon and Egypt country risk premiums as i believe it is safer than Lebanon but riskier than Egypt). Sincerely I believe that after 10 years we will have 3 or 4 countries in Syria and that syria will disintegrate. How can I reflect this in my constant growth phase? should i push CRP of constant growth phase up to reflect my expectations or down since this phase should last forever . I don't know how to determine this CRP as none of the textbooks tackle it.

Answer 1

It depends on your expectations after the disintegration of Syria. If you think that the risk will increase then increase your CRP.