Why is the use of time-declining discount rates advocated in the literature? Assume project A will result
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Why is the use of time-declining discount rates advocated in the literature? Assume project A will result in net benefits of EUR 1 billion in 200 years and project B will result in net benefits of EUR 1 million in 40 years. Compute the present value of these projects using a time-constant discount rate of 3 per cent and a time-declining discount rate of 3 per cent from year 0 to year 49, 2.5 per cent from year 50 to year 99, 2 per cent from year 100 to year 200. Discuss the results.
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