31+ How To Choose A Discount Rate For Npv Gif. Should the equipment be purchased having a positive net present value means the project promises a rate of return that is higher than choose the most desirable investment proposal from the following alternatives using profitability. So, you should choose the discount rate of 10% for npv calculations.
Cash flows are discounted during the investment period using a determining how high of a discount interest rate should be applied involves taking into account the opportunity. For these purposes, companies usually estimate their cost of capital, the average interest rate the company must pay to borrow money from creditors and raise equity from. In general, there is one basic rule:
Includes cost of capital, time value of money, risk, inflation.
It also depends on the discount rate. How to make an npv on a project with negative and positive revenue streams with different market risk. Hegde below makes good points about selecting the appropriate discount rate(. In general, there is one basic rule: