Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/28104
Authors: 
Freeman, Mark C.
Year of Publication: 
2009
Series/Report no.: 
Economics Discussion Papers 2009-42
Abstract: 
In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the ENFV increases with uncertainty over future interest rates, the expected utility decreases because of the planner's desire to smooth consumption across time. This paper therefore shows that Weitzman (1998) is right and that, within his economy, the far-distant future should be discounted at its lowest possible rate.
Subjects: 
Discount rates
term structure
capital budgeting
interest rate uncertainty
environmental planning
JEL: 
D61
E43
G12
G31
Q51
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type: 
Working Paper

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