Evaluating Negative Benefits

Abstract

Evaluating investments by discounting anticipated future benefits at an exogenously determined risk-adjusted discount rate (hereafter referred to as the RADR approach) is well accepted in the canon of finance. If benefits (Dt) are to be received for T periods and if k, the discount rate, is constant over each of the t periods, then the discrete time net present value (NPV) is defined as:A positive NPV characterizes a desirable investment.