Question

If a politician wanted to bias the net present value of $1,000 in 10 years upwards, and they know the discount rate is either 2% or 6%, are they better off reporting the net present value of $1,000 under a 4% discount rate, or reporting the average of the net present value under a 2% discount rate and the net present value under a 6% discount rate?

Answer 1

NPV at 4% discount rate= $675.56

Average of NPVs at 2% discount rate and 6% discount rate= $689.37

In order to bias NPV, it is better to report the average of NPVs at 2% and 6% discount rates.

Calculations as below:

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