Private Sector Project Evaluation Table 11.2 shows two different projects (R&D or Advertising) The discount rate plays a key role in deciding what project to choose, because the cash inflows occur at different times The lower the discount rate. the more valuable the back-loaded project 16
16 Private Sector Project Evaluation • Table 11.2 shows two different projects (R&D or Advertising). • The discount rate plays a key role in deciding what project to choose, because the cash inflows occur at different times. • The lower the discount rate, the more valuable the back-loaded project
Table 11.2 Table 11.2 Comparing the present values of two projects Annual Net Return P\ Year R&D Advertising R&D Advertising 0 1,000 -S1,000 0 S150 S200 600 ,01 128 550 1,200 05 46 37 07
Table 11.2