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Choice of a discount rate

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An analyst for a municipal public housing agency explained the choice of a discount rate as follows: "Our agency funds its capital investments through nationally issued bonds. The effective interest rate that we pay on the bonds is the cost that the agency faces in shifting revenue from the future to the present. It is, therefore, the appropriate discount rate for the agency to use in evaluating alternative investments." Comment on the appropriate- ness of this discount rate.

Reference no: EM131251897

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