What Is the Impact of a High Discount Rate on a Project with Very Long-Term Cash Flow Projections?

A high discount rate severely penalizes cash flows that are projected far into the future. The present value of cash flows received in 10 or 20 years becomes negligible when discounted at a high rate (e.g.

30% or more). This forces the valuation to rely primarily on near-term cash flow projections, which can be challenging for early-stage projects whose value is expected to materialize much later.