interest rate plays a large and important role in investment decisions.With it you can accurately assess investment from their profitability.Through investment, the investor in the first place itself prejudice the use of capital funds, and he needs the compensation received for damage for which he hopes.Therefore, he expects not only a return on investment, but also to obtain a certain income.Thus, carrying out the investment should be based on the market rate of interest: the project is considered to be unprofitable if the interest rate is higher than the level of profitability of planned investments.Therefore it is necessary to consider various opportunities of investment decision-making.
seek to maximize their own income, economic actors should act and plan activities in such a way that it gave the maximum effect.It is known that the flow of income from investments not at a time and spread over some periods.In this regard, the economy operates on a term such as discounting.
This method of comparison and correlation of the future and the present value of capital assets.The meaning of this process is as follows.Planning an investment project should be commensurate with the current cost of today's potential future earnings.
should be able to apply discounting.This contributes to making the right decisions and allows a rational choice.For example, you must determine on what terms to grant the loan is more favorable: 29% per annum to accrue compound interest quarterly or semiannual assessed at the rate of 31%.
This problem is theoretically very difficult to solve, but using mathematical methods, it is possible to calculate that the greatest effect will give 31% rate discount.This will enable the bank to prevent the loss of revenue related to the debtor or unattractive to unfavorable bank interest rates are too low.This pattern is typical for investment decisions.
discounted
This method, as well as the calculation of compound interest, a valuation variant in which take into account the possible change in time value of money.The reason for these changes lies not even in inflationary phenomena.After all, money and inflation at zero change its value, taking into account future income from investments and to take into account profits.And in other cases, the appropriate discount rate.This will help to throw doubts about the valuation of financial assets for which there is a delay in time refund.
With discounting revaluation of long-term investment projects, which provides accounting standards.
to perform financial analysis and cash flow discounting is used.It should be done in accordance with the recommendations of the Ministry of Economy to assess the effectiveness of investment projects.
According to the guidelines, called the reduced discounting cash flows occurring at different values to their value at one particular time.The resulting interval is typically measured in years.
In fact, discounting - is a measure of the purchasing power of money, the cost over a period of time.On the basis of the current is compared with the prices in future years.
On the method of discounting can also be said that this payment, which allows you to give a response to how much you need to invest today to over a number of years specified by the investor to receive an income.
