Choice of Discount Rate

Steve Curry and John Weiss ()
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Steve Curry: International Development Economist and Consultant
John Weiss: University of Bradford

Chapter Chapter 8 in Project Analysis in Developing Countries, 2023, pp 227-255 from Springer

Abstract: 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.

Date: 2023
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DOI: 10.1007/978-3-031-40014-8_8

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