Discount Rate

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What It Means

The Discount Rate is the interest rate used in calculated the present value of a series of future values under a Discounted Cash Flow Analysis.

Why It’s Important

Discounted Cash Flow Analyses are very common tool in the valuation analysis of businesses. The discount rate chosen for the analysis can have a significant impact on the calculation of the present value. It is a measure of the expected value of a particular investment, taking into account the assumed level of risk.

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