Discount Rate

QUOTE AND NEWS
The DIV-Net  Oct 18  Comment 
The Dividend Discount Model (DDM) is the key valuation technique for dividend stocks. The most straightforward form of it is called the Gordon Growth Model. This guide explains how it works and the streamlined way to use it. Determining the...
SeekingAlpha  Aug 13  Comment 
ByBen Kramer-Miller: Tahoe Resources (NYSE:TAHO) just announced its second-quarter earnings figures and they were nothing short of excellent. The company earned $36.1 million or $0.25/share while generating $58.9 million in operating cash-flow or...
Motley Fool  Jun 26  Comment 
Three reasons why the bear thesis for SolarCity may only be relevant in a bear market
Mondo Visione  Mar 27  Comment 
The European Banking Authority (EBA) published today its final Guidelines for the calculation of the discount rate for variable remuneration and clarifying how it should be applied. These Guidelines will support EU Member States in the calculation...
SeekingAlpha  Mar 14  Comment 
By The Investment Doctor: Introduction In this article I'll have a closer look at Black Iron (OTC:BKIRF) which aims to develop its S iron ore project in Ukraine. I will start by providing a background of the project where after I will use the...
SeekingAlpha  Mar 13  Comment 
By Safraner Investment: The Dividend Discount Model (DDM) is a simple and well known tool to value stocks by discounting to present value their future dividend distributions. In its simplest format, the DDM assumes a perpetual constant rate of...
SeekingAlpha  Mar 3  Comment 
By Cam Hui: Let's focus on fundamentals and step back from the angst over the Ukraine and Crimea, which is likely to dissipate soon because neither Europe nor the United States has shown any appetite for military intervention that would really...
Yahoo  Jan 14  Comment 
One regional Federal Reserve bank continued to push for a cut in the U.S. central bank's emergency lending rate in December, while three others renewed a request to hike it, minutes of Fed deliberations released on Tuesday showed. The Minneapolis...
Resource Investor  Jan 3  Comment 
The future price of gold cannot be discussed without considering its implied discount rate expressed through time-preference. This is the relative desire to own goods at an earlier date rather than later.




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A discount rate is used to determine the present value of a set of future cash flows. When an analyst wishes to value a company, the company's discount rate is the rate that they expect to earn on investments in their business. The discount rate is commonly used to determine a company's value using a discounted cash flow (DCF) valuation. In a DCF valuation, the discount rate is the rate at which future cash flows are discounted when finding their current value. In that sense, the discount rate is the expected return on future projects within a company.

It is important to note that the discount rate is not a fixed value for any given company, but instead it is a subjective value. No one can determine exactly how much a company will earn on future investments and as such no one could determine the exact discount rate to use during a valuation. In most cases, analysts will use historic figures along with the discount rate of comparable investments when selecting the discount rate to use in a valuation analysis.

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