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The Six-Minute Guide to Making Better High-Stakes Decisions

Harvard Business Review

When making big decisions, executives use familiar tools like discounted cash flow analysis far too often. It’s much more useful to take a different approach: to build multiple qualitative scenarios, for example, or to develop a set of comparative reference cases.

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Why You Should Crowd-Source Your Toughest Investment Decisions

Harvard Business Review

Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value. But it is possible to significantly improve your odds by understanding which decision-support tools work best for which decisions.

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

In operational engineering, PE firms develop industry and operating expertise that they bring to bear to add value to their portfolio companies. In governance engineering, PE investors control the boards of their portfolio companies and are more actively involved in governance than public company directors and public shareholders.

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Still Many Ways to Skin a Capital Cost

Harvard Business Review

Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value. Yeh, William S. Schulze, and Michael H. McNulty et al.

CAPM 14
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Why We Need to Update Financial Reporting for the Digital Era

Harvard Business Review

Digital companies, however, consider scientists’ and software workers’ and product development teams’ time to be the company’s most valuable resource. These criteria assume a limited supply of financial capital and that prudent allocation of financial capital determines a firm’s success.

Report 8
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Why Sit on All that Cash? Firms Uncertain on Cost of Capital

Harvard Business Review

Fully 79 percent of companies, including 91 percent with annual revenues greater than $1 billion, use discounted cash flow techniques. There is less consistency, however, in how organizations estimate cash flows and determine the weighted average cost of capital at which those cash flows are discounted.