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.