Walker used a 12% discount rate to find the present value of annual cash flows caused by
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Question:
Walker used a 12% discount rate to find the present value of annual cash flows caused by an increase in the unit sales of 3-in., 6-in., and 8-in. pipe. He believes this should be 13% and may be even as high as 15%. Does it make sense to use a higher discount rate in Question 2? How important is this "interest rate concern" to the project if the expected rate of inflation is 3% per year? Justify your answer.
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