Discount rates in modelling

Discussion in 'CA1' started by km389, Apr 13, 2017.

  1. km389

    km389 Member

    In one of the flashcards in the modelling chapter it says the discount rate should reflect
    1. the return required by the company
    2. the level of statistical risk attached to the cashflows
    Is the required return here simply the WACC?
     
    divyam sankharva likes this.
  2. Mark Willder

    Mark Willder ActEd Tutor Staff Member

    One way to measure the required return would be the WACC. The company could calculate it in other ways though, eg projects with a greater risk may be allocated a bigger discount rate than the WACC.

    Best wishes

    Mark
     

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