Discount Rate


September 20th, 2008 by admin admin

I think in calculating PV or NPV, one of the most confusing part of the calculation is the determination of the discount rate. I used to think that discount rate is the interest rate. Now I have come to realise that it is not the case. Discount rate is the rate you use to determine whether a project is worthwhile taking. Discount rate takes into consideration the risk of the project. Take a look at this Net Present Value example and see if it could help to clarify the difference between discount rate and interest rate.

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