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In this article, we’ll cover the basics of what a discount rate is and where it’s used. In this article, we cover the latter. In DCF analysis, the WeightedAverageCost of Capital (WACC), representing the average return required by all stakeholders, is commonly used as the discount rate.
If you want to read to a step-by-step example of a DCF, skip to the end of the article here. d is the discount rate (which is usually the weightedaveragecost of capital (WACC), r in our previous example). Some practitioners will use an average of both methods. . Ce = Cost of Equity. The DCF Formula.
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