The Timing of Costs and Benefits

• When Costs and Benefits Come Over Time

  • Hurdle rate: minimum rate of return expected by a corporation for investments
    • Often around 20%
  • If the hurdle rate is i then
    • Money received or spent a year from now should be discounted (divided) by (1+i)
    • Money received or spent n years from now should be discounted (divided) by (1+i)n

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