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Financial Analytics: Science and Experience
 

The discount rate on cash flows from investment projects in the transportation sector: theoretical fundamentals and evaluation

Vol. 9, Iss. 2, JANUARY 2016

PDF  Article PDF Version

Received: 26 November 2015

Accepted: 21 December 2015

Available online: 17 January 2016

Subject Heading: INNOVATION AND INVESTMENT

JEL Classification: H43, R42

Pages: 15-30

Malinovskaya O.V. Admiral Makarov State University of Maritime and Inland Shipping, Saint Petersburg, Russian Federation
ifinansy@yandex.ru

Sapko E.A. Azov-Black Sea Basin Branch, Federal State Unitary Enterprise Rosmorport, Novorossiysk, Russian Federation
ursap@yandex.ru

Brovkina A.V. Admiral Makarov State University of Maritime and Inland Shipping, Saint Petersburg, Russian Federation
brovkinaav@mail.ru

Importance The article identifies challenging areas of investment project studies in the transport infrastructure sector.
     Objectives The research devises and tests methods for evaluating the discount rate on cash flows from investment projects in the transportation sector, which alleviates contradictions between business and the State.
     Results In theory, the discount rate on cash flows can be a risk and profit metric. The specifics of the State and business interests are critically important, since the State seeks to understate the discount rate, meanwhile business strives to maximize it. In these circumstances it is reasonable to assess the public and private discount rate.
     Conclusions and Relevance The rate is assessed with two methods, i.e. the market (unbiased) and subjective one. We substantiate the methods, considering the high uncertainty in the contemporary practice of investment. The market evaluation model pursues increasing the reliability and reasonableness of the rate.

Keywords: discount rate, investment program, public discount rate, public private partnership, infrastructure bonds

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