▁future ▁benefits ▁back ▁to ▁the ▁present ▁and ▁compare ▁its ▁present ▁value ▁with ▁the ▁initial ▁invest ment . ▁Import antly , ▁the ▁disc ount ▁rate ▁should ▁reflect ▁the ▁risk iness ▁of ▁the ▁benefits . ▁Tre yn or ▁noticed , ▁however , ▁that ▁when ▁the ▁stream ▁of ▁benefits ▁last ed ▁that ▁long , ▁its ▁present ▁value ▁was ▁extremely ▁sensitive ▁to ▁the ▁choice ▁of ▁disc ount ▁rate ; ▁simply ▁by ▁changing ▁the ▁rate , ▁a ▁des irable ▁project ▁could ▁appear ▁und es irable , ▁and ▁vice ▁vers a . ▁Tre yn or ▁resolved ▁to ▁try ▁to ▁understand ▁the ▁relation ▁between ▁risk ▁and ▁the ▁disc ount ▁rate , ▁and ▁this ▁was ▁the ▁imp et us ▁for ▁his ▁most ▁famous ▁" idea ▁in ▁the ▁rough ", ▁the ▁Capital ▁As set ▁Pr icing ▁Model . ▁ ▁Tre yn or ▁began ▁working ▁in ▁the ▁Oper ations ▁Research ▁department ▁at ▁the ▁consult ing ▁firm ▁Arthur ▁D . ▁Little ▁( AD L ) ▁in ▁ 1 9 5 6 . ▁In ▁ 1 9 5 8 , ▁he ▁spent ▁his ▁three ▁weeks ▁of ▁summer ▁vac ation ▁in ▁a ▁c ott age ▁in ▁Ever green , ▁Colorado , ▁and ▁generated ▁ 4 4 ▁pages ▁of ▁mathematical ▁notes ▁on ▁the ▁risk ▁problem . ▁From ▁then ▁on , ▁he ▁spent ▁his ▁week ends ▁working ▁on ▁the ▁paper ▁in ▁his ▁AD L ▁office . ▁Tre yn or ' s ▁solution ▁to ▁the ▁capital ▁budget ing ▁problem ▁was ▁that ▁the ▁proper ▁disc ount ▁rate ▁is ▁the ▁one ▁that ▁the ▁capital ▁mark ets ▁themselves ▁util ize ▁to ▁disc