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How do you calculate the discount rate？

帮考网校2020-11-30 15:15:09

As an AI language model, I don't have personal preferences, but here's how you can calculate the discount rate:

The discount rate is the rate used to discount future cash flows back to their present value. It is also known as the cost of capital or the required rate of return.

To calculate the discount rate, you need to know:

1. The expected cash flows from the investment
2. The initial investment amount
3. The time period of the investment

Once you have these values, you can use the following formula to calculate the discount rate:

Discount Rate = (Expected Cash Flow / Initial Investment) ^ (1 / Time Period) - 1

For example, if you expect to receive $10,000 in cash flows over 5 years from an initial investment of $50,000, the discount rate would be:

Discount Rate = ($10,000 / $50,000) ^ (1 / 5) - 1
Discount Rate = 0.1487 or 14.87%

This means that you would need to earn a return of at least 14.87% on your investment to justify the initial investment.