28th November 2019

propertymetrics
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How do you determine discount rate?

The discount rate is the rate of return used in a discounted cash flow analysis to determine the present value of future cash flows. This rate of return (r) in the above formula is the discount rate.

Just so, what is the discounted cash flow method of valuation?

Finance professionals often use the discounted cash flow (DCF) valuation method to determine the attractiveness of an investment opportunity. DCF analysis uses future free cash flow (FCF) projections and discounts them to estimate the present value, which is then used to evaluate the investment potential.

What is the formula for WACC?

Definition of WACC. A firm's Weighted Average Cost of Capital (WACC) represents its blended cost of capital across all sources, including common shares, preferred shares, and debt. WACC is used in financial modeling as the discount rate to calculate the net present value of a business.

What is terminal value in DCF?

Terminal value is the value of a project's expected cash flow beyond the explicit forecast horizon. An estimate of terminal value is critical in financial modelling as it accounts for a large percentage of the project value in a discounted cash flow valuation.
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