Abstract: Hering, Olbrich, and Rapp (2021) pointed out limitations to the risk-adjusted method proposed in Kruk (2020) and advised using scenario analysis as an alternative. Based on their reply, some additional improvements of the method can be proposed, such as using the time-dependent discount rate. Business practitioners value the simplicity of the risk-adjusted net present value method. As a result, scenario analysis is not a viable solution to the problem of calculating investment profitability because business practitioners value the simplicity of other calculation methods.
Read the full article in the Quarterly Journal of Austrian Economics.
