Intrinsic valuation: Clearly, your overly nerdy classmate places too much emphasis on pointless numbers that describe the fundamental sources of revenue and expenses an economy has to deal with, which one could hypothetically go look up if one actually learnt to read the Balance of Payments and budget. However, in true business school student style, I would argue what matters is more the potential for additional value. For instance, how much revenue can Montenegro add because one group of jet-setting HBSers somehow decided to spend a week on yachts over there? How much growth potential awaits Germany as it continues to ramp up its Oktoberfest circuit even as its manufacturing base faces competition? Thinking through these questions is what will truly enable you to identify value drivers at the fundamentals level.
Multiples: Any good investor will scoff at your carefully conducted valuation analysis by pulling a multiple number out of their ass relevant industry experience. As we have noted in FIN, perfect comparables may be hard to find. Perhaps waiting to see whether the President manages to buy Greenland may be prudent, before deciding on your own offer bid.
Precedent transaction: No method provides an easier way to justify your own expenses than looking at how much someone else was willing to pay. HBS debt, trips to Mexico, and Canada Gooses are all cases in point. On this topic, there are fewer cases of transaction, but I can think of some. The sale of Texas by Mexico or lease on Hong Kong might provide some helpful numbers. Please refer to the non-existent helpful appendices from your EGC class to get those numbers.Of course, in the midst of all this, you might want to stop and think of what on earth you could use a small island for. The case on Fyre Festival currently being written could have helpful strategic insights. Your best Baker Scholar friend, Harby
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