This difference leads to different behaviors. In NPV, a higher discount rate reduces the value of future benefits, often favoring projects with earlier returns. In NPC, a higher discount rate reduces the weight of future costs, which can make large, long‑duration, back‑loaded projects appear more attractive. This is why discount‑rate selection is a policy decision that shapes which alternatives rise to the top.

If the discount rate is set too high, long‑term or multi‑phase projects are distorted. In NPV analysis, a high discount rate suppresses future benefits, making long‑horizon projects appear unattractive. In NPC analysis (common in public‑sector evaluations), a high rate can have the opposite effect: it heavily discounts high costs in the outer years and can make multi‑phase, back‑loaded projects appear artificially inexpensive.

Organizations typically rely on three common techniques to evaluate capital projects. Each has its place, but only one consistently supports sound long-term decisions.