Cumulative Method of the Discount Rate Calculate at the Process of an Investment Project Effectiveness Evaluating
Year: 2025
Type: article
Abstract: Determining the discount rate for performance evaluation remains a challenging task, despite the level of development in financial analytics and investment practices, especially at the current stage of investment business in the Russian Federation. At this stage, there are several challenges, including information support issues and related restrictions. The practice of recent years has shown that the discount rate used in investment projects is often either formal or used without any justification. This article discusses the most common methods for constructing a discount rate within financial analysis. The author analyzes the main methods for constructing the discount rate and considers the options for components that are most appropriate when assessing the effectiveness of investment projects. At the same time, given that the main parameters for calculating the discount rate in investment projects are the risk-free return rate and the risk premium associated with the project. Traditionally, the risk-free yield has been assumed to be equal to the yield on 30-year US government bonds. American financial statistics have been used to determine the risk surcharge. However, in today's environment, it has become clear that US government bonds are not a risk-free asset for domestic investors. Therefore, the assessment of discount rates based on stock market indicators from unfriendly countries is no longer relevant in investment analysis and evaluation. This requires a re-examination of domestic criteria, data sources, and developments in determining the discount rate to evaluate the effectiveness of investment projects and make decisions on their feasibility.
Authors: I. Bykovnikov, T. Vinokurova
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4409190179