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Peter Pundit has been hired by a (rather biased) news outlet to provide a cost benefit analysis of proposed nuclear power plant that refutes an earlier one done by environmentalists. The environmentalists’ analysis shows that the long term cleanup costs outweigh the short term benefits. In trying to counter the environmentalist’s report, Pundit would most likely…

Sagot :

jepessoa

Answer:

Use a higher discount rate and assume that cleanup would occur later.

Explanation:

When you are evaluating cash flows, the higher the discount rate, the lower the present value. Also, if the discount rate occurs farther away into the future, its present value will be lower. For example, a cash flow that occurs in 10 years will have a lower present value than a cash flow that occurs in 5 years.

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