Business, Management and Accounting
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Mismatched discount rates can mislead project comparisons, impacting investment decisions.

SSRN Electronic Journal
A Note on the Comparison of NPV Profiles of Mutually Exclusive Projects
Domingo Castelo Joaquin

Paper Summary

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The cost of a project should match its risk level for accurate evaluation. Using the same discount rate for projects with different risks can lead to misleading comparisons. By considering differences in project risk and cost of capital, Net Present Value (NPV) profiles can be more useful in comparing projects.