Evaluating long-term infrastructure projects

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When it comes to time value of money, a key choice is what discount rate to use.

We are primarily interested in what discount rate a company should use when evaluating an investment. But, government must also use a discount rate when evaluating investments such as infrastructure projects.

While there is theory to guide what the rate should be, arguably the choice tends to be more arbitrary.

When evaluating long-term infrastructure projects do you think it better for government to err more towards using a higher or lower discount rate. Why?

Reference no: EM133004146

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