ECON361 Lecture Notes - Lecture 3: Discounting, Microsoft Excel, Social Discount Rate
9 Aug 2016
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Most cba studies, or projects, they tend to be investments over multiple years. These multi-period investments have costs and benefits occurring over different timelines. We need a method to separate the impacts from a quantitative and monetary point of view, uh, and we usually put them in terms of cash flows. Now although we use the term cash flows , the dollar values might not be the same as the actual cash amounts. But in cash flow analysis, we separate the actual flow of funds out at a certain particular, or a particular period of time. So for some, uh, for some instances, the actual market prices of any particular input or output of a project will not reflect the true value of the project"s input or output. The process to discounting cash flows, and it can be broken down into 3 components:
