Accession Number : AD0832903

Title :   THE DISCOUNT RATE IN THE NON-MARKET CONTEXT.

Descriptive Note : Masters thesis,

Corporate Author : NAVAL POSTGRADUATE SCHOOL MONTEREY CA

Personal Author(s) : Franks, Francis John

Report Date : JUN 1968

Pagination or Media Count : 44

Abstract : Systems Analysis uses many disciplines and sophisticated techniques to determine the relative effectiveness of alternate systems. This relationship can then be reversed by an arbitrary choice of a discount rate. In the private sector, the discount rate is determined by the cost of capital. In the public sector, the cost of acquiring capital is not clearly defined. The following proposals for the interest rate in the public sector are considered: (1) the government bond rate; (2) the rate of growth of the national product; and (3) a rate derived from the average rate of return in the private sector. It is concluded that the interest rate in the public sector currently lies between 4.75 and 10 percent. The circumstances which generate uncertainty and the means of handling this uncertainty are also discussed. A procedure is recommended which modifies the difference between expected costs to make them equally significant. Particular attention is focused on uncertainty occasioned by changing technology and the probability of war. It is concluded that a unique estimate of the risk component is indeterminate and that uncertainty should be considered in the context of the specific systems under construction. (Author)

Descriptors :   *COST EFFECTIVENESS), (*ECONOMICS, MANAGEMENT PLANNING AND CONTROL, DECISION THEORY, PROBABILITY, UNCERTAINTY, REGRESSION ANALYSIS, COMMERCE, THESES, COSTS, MONEY.

Subject Categories : Economics and Cost Analysis
      Operations Research

Distribution Statement : APPROVED FOR PUBLIC RELEASE