Calculating the single equivalent discount rate (SEDR) is a key concept in finance, referring to the process of determining the single discount rate that would generate the same present value for a series of future cash flows as multiple discount rates applied over different periods.
The concept of the SEDR is crucial for evaluating the viability and return on investment (ROI) of long-term projects and comparing the attractiveness of different investment opportunities with varying cash flow patterns. For instance, businesses may use the SEDR to make informed decisions about capital budgeting projects with uneven returns over multiple years.