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Choice of Discount Rate

In: Project Analysis in Developing Countries

Author

Listed:
  • Steve Curry

    (International Development Economist and Consultant)

  • John Weiss

    (University of Bradford)

Abstract

Up to this point, there has been no discussion of the discount rate, and the project examples have mostly employed a relatively high discount rate (such as 10% or 12%). Such rates are typically associated with a rate used as a rationing device for scarce investment funds in an opportunity cost approach to discounting. Arguably, the discount rate is the single most important parameter in project economic analysis since it allows comparison of benefits and costs at different points in time and also provides the means through which a project can be tested (either with a positive NPV at that discount rate or an IRR above that rate) for viability. However, there are different ways in which the choice of discount rate can be approached.

Suggested Citation

  • Steve Curry & John Weiss, 2023. "Choice of Discount Rate," Springer Books, in: Project Analysis in Developing Countries, edition 3, chapter 0, pages 227-255, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-40014-8_8
    DOI: 10.1007/978-3-031-40014-8_8
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