The Discount Rate in the Assessment of EU Funded Investment Projects

Dochka Velkova and Yana Kirilova

Economic Studies journal, 2023, issue 4, 135-148

Abstract: The article presents the effect of the financial discount rate on key financial indicators in the cost-benefit analysis used in the assessment of public investment projects – financial net present value, financial internal rate of return and financial gaps. It then estimates the Weighted Average Cost of Capital as an alternative approach for determining the discount rate. The model builds on the debt/equity ratio in the overall project investment portfolio and Capital Asset Pricing Model based on: (1) the return gained from investment in risk-free instruments; (2) the risk premium for the state (the so-called asymmetric state-related risk); (3) the business risk premium; (4) the project asymmetric risk premium. The model is then applied to an environmental investment project in Bulgaria.

JEL-codes: H43 H54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.iki.bas.bg/Journals/EconomicStudies/2023/2023-4/09_Dochka-Yana.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2023:i:4:p:135-148

Access Statistics for this article

More articles in Economic Studies journal from Bulgarian Academy of Sciences - Economic Research Institute Contact information at EDIRC.
Bibliographic data for series maintained by Diana Dimitrova ().