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In this article, we’ll cover the basics of what a discount rate is and where it’s used. Key takeaways: The discount rate is primarily used by central banks to manage the economy and investors to calculate the presentvalue of future cash flows from an investment. In this article, we cover the latter.
If you want to read to a step-by-step example of a DCF, skip to the end of the article here. This value is widely referred to as the “NetPresentValue” (NPV). . which produces a NetPresentValue of the Terminal Value of: $74 million. . Rf = Risk-free Rate. The DCF Formula.
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