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Article Details

Published Date: 10-09-2021
Author: Executive Compass

Discounting is used to compare costs and benefits occurring over different periods of time – it converts costs and benefits into present values. It is based on the concept of time preference: that generally people prefer to receive goods and services now rather than later. If Projects A and B have identical costs and benefits but Project A delivers benefits a year earlier, time preference means Project A is valued more highly. (The Green Book)

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