Uses & Abuses Of Discount Rates: A Primer For The Wary

Uses and Abuses of Discount Rates - Long Finance, 2015

43 Pages Posted: 7 Oct 2020

Date Written: September 01, 2015

Abstract

Long Finance research seeks to explore the concept of discount rates, their use and implications over time. The research on this topic has involved a variety of people over the years, most notably Dr Nick Goddard, Arjuna Sittampalam, and Michael Mainelli.

Discounted cash flow (DCF) and net present value (NPV) analyses have long been part of the financial analyst's toolbox. In order to use both tools we need to decide on a discount rate and use that discount rate in some exponential equations. Exponential equations lead in turn to infinities and are thus inherently problematic in a constrained world. The use of discount rate tools leads to conflict in values over time.

Realizing the misconceptions and perceived complexity surrounding the concept of discount rate, Dr Nick Goddard volunteered to provide an overview of discount rates. "Uses and Abuses of Discount Rates: A Primer for the Wary" was published as a free-to-download Long Finance publication in September 2015 (press release).

Keywords: Discount Rates, DCF, NPV, Overview

JEL Classification: G00

Suggested Citation

Goddard, Nick, Uses & Abuses Of Discount Rates: A Primer For The Wary (September 01, 2015). Uses and Abuses of Discount Rates - Long Finance, 2015, Available at SSRN: https://ssrn.com/abstract=3676344

Nick Goddard (Contact Author)

Z/Yen Group Limited ( email )

41 Lothbury
London
United Kingdom

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