Probabilistic cash flows and equivalent discount rates

Many authors have studied the probabilistic cash flows in recent years. Hillier, Spahr, Giacotto, Chandra and Guild, Rosenthal, and Zinn et al. are some of these authors. They introduced some analytical methods which determine the probability distribution function of the net present value and internal rate of return of a series of random discrete cash flows; considered seially correlated cash flows and the uncertainty of future capital investment and reinvestment rates; presented the formulas of benefit-cost ratio for the probabilistic cash flows. Many other authors studied the arithmetic of inflation corrections in evaluating real present values. Freidenfelds and Kennedy, Oakford and Salazar are some of these authors. In the paper, first, the expected value and the variance of a probabilistic cash flows are obtained by means of moments. Assuming that cash flows are probabilistic because only future discount rates (involving inflation, risk and other factors) are uncertain, we calculate the mean level of future discount rates equivalent to the risk degree in probabilistic cash flows. A numeric example is given in the paper.