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Discount rate justification and choosing when defining an economic efficiency of investments

Available online: 25 May 2011

Subject Heading: Investment potential

JEL Classification: 

When evaluating investment projects every company, which is forecasting investment activity, faces a necessity to calculate discount rate. The effect of any investment project depends on how to properly and correctly judged its future cash flows, considerable influence on the result of calculation is the discount rate. In other words, any project can be profitable when the discount rate is reduced, and any project can be presented as unprofitable, when the discount rate is increased. So precise discount rate justification is the first step to determine an economic efficiency of investments.

Keywords: discount rate, economic efficiency of investments, risks, beta coefficient

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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