Country Risk Accounting in the Forecast of Company’s Discount Rate

The value of country risk premium has a great influence in determining and forecasting of expected discount rate for modern companies. There are many methods of country risk value assessment, which are based, as in the calculation of basic financial (macro and micro) parameters, and on the analysis of non-financial factors. However, most investors prefer to use the data provided by international rating agencies, despite the fact that their country risk measurement raises many questions. The consequences of an incorrect estimation of country risk premium will become incorrect investment decisions, unwarranted downgrade, and hence the funding of "healthy" companies and increased funding "dysfunctional" organization. Thus, the problem of timely and objective calculation of country risk values is the one of the most important question for Russian and foreign companies. This work is devoted to analysis of the structure and country risk factors and assessing their impact on the future value of the expected discount rate. The aim of this paper is to analyze structure and country risk factors, as well as existing methods of its calculation, and the forecast of country risk impact on the future rate of discount. The study examined the existing method of calculating value of country risk premium used in the evaluation of country risk by international rating agencies, have been testing the econometric model estimating the country risk for the BRICS group and formulated conclusions about correctness. Based on the data we analyzed the influence of country risk on the expected discount rate and presented the forecast of the discount rate in Russia capital market.