Slow, Inflexible, and Micromanaged: The Problems of a Military that Overstates Risk

A few weeks ago in my corporate finance class at West Point, I hosted a guest speaker from a Cambodian private equity firm. The lesson focused on valuations and risk. Riskiness in finance relates to the uncertainty of a prediction, and it’s measured with a discount rate. The higher the rate, the riskier the estimate and the less value it would have relative to one with less risk. We analyzed an opportunity to invest in a Cambodian mango plantation. We were shocked when the guest shared that the standard discount rate used for these types of “frontier” investments in...

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