The choice of discount rate is a key variable in the valuation discount and can significantly change the outcome. The rate chosen generally reflects the cost of capital, so it will take the market interest rate for a comparable term, or possibly the expected inflation rate, possibly plus a risk premium.
Inflation is, however, a distortion of the future value, because it only reflects the increase (or decrease, if deflation) in prices induced. In the case of updating financials, the reference shall be the market rate
the money market rate for short periods,
and the bonds or Treasury bonds for longer durations.
According to the Belgian economist Christian Gollier, the discount rate is a critical variable in the economic dynamics. A much lower value currently practiced in many Western countries which takes into account the interests of future generations.
This would reconcile the thinkers of the sustainable development of economic science, its method and tools.
The concept of discounting in industry
The choice of discount rate strongly influences the choice of industrial investments. This is the case of the nuclear industry, for which the costs and benefits involved.
The concept of discount accounting
Discounting is an accounting method to compensate for the effects of inflation in contracts. Contrary to the review, it is done only once at the beginning of the contract and not every month. In public procurement, these two methods are mutually exclusive of each other.