THE EVALUATION OF NON-MARKETABLE INVESTMENTS.
CENTER FOR NAVAL ANALYSES WASHINGTON D C SYSTEMS EVALUATION GROUP
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The evaluation of non-marketable investments, of which defense projects are the most typical, presents difficulties not encountered in the case of marketable investments. The net effect of these difficulties is to render the operation of discounting, which is implied by economic theory for the evaluation of marketable investments, meaningless. Hence the search for a theoretically correct rate of discount to apply to such investments is bound to be futile. The benefits and costs of a non-marketable investment must ultimately be evaluated directly without the intermediate step of discounting. However, neither from a theoretical nor from a practical point of view can there be any objection to providing the decision-maker with present values calculated on the bases of different rates of discount, so long as no claim is made as to which is the correct one. But it is absolutely essential to provide him with the series of costs and benefits undiscounted.
- Economics and Cost Analysis