Manipulating the discount rate when valuing international investment projects

Valuing a Liquidity Discount

Ren-Raw Chen is a professor in the Finance Area of the Graduate School of Business Administration at Fordham University in New York, NY. [email protected] This article is motivated by the fact that the majority of securities in the financial markets are not frequently traded and hence a discount can be applied to properly ref lect such a deprived privilege. First, only a small fraction of corpo...

Evaluating Incremental/Iterative Software Projects by Valuing Investment/Implementation Risks

The optimisation process of scheduling an incremental/iterative software project can be approached as a multi criteria decision problem, formulated by a linear programming model, aimed to propose alternative project schedules and examine cost trade-offs. In this paper, we apply the prominent economic theory of Real Options to analyse project investment risks and discover the economic value asso...

Stochastic Optimal Growth When the Discount Rate Vanishes

It has been shown that long-run optimality of the limit of discounted optima when the discount rate vanishes is implied by a condition on the value function of the optimal program. We suggest a new method to verify this condition in the context of one-sector optimal growth. The idea should be more widely applicable.

The Social Discount Rate

What discount rate should be applied to social investments? It is standard to use the market interest rate, thereby respecting private preferences. We show that application of this “revealed preference” criterion rests on faith, not logic. It is justified only if preferences over all choices, including past choices, are time invariant. The conditions for this to be true are stringent. Under mor...

Valuing Changes in Investment Opportunities