Discount Rate Calculator

Calculate appropriate discount rates for investment analysis, present value calculations, and financial planning. Determine WACC, risk-adjusted rates, and more.

✓ WACC Calculation ✓ Risk Adjustment ✓ Multiple Methods

Discount Rate Analysis

WACC Parameters

Total market capitalization

Total debt outstanding

Required return on equity

Interest rate on debt

Corporate tax rate

Discount Rate Formulas

WACC:
WACC = (E/V × Re) + (D/V × Rd × (1-T))
CAPM:
Re = Rf + β × (Rm - Rf) + CSR
Build-up:
Re = Rf + ERP + SP + IRP + CSR + LP

Example Scenarios

Large Corporation
Low risk, established company
Growth Company
Medium risk, expanding business
Small Business
High risk, private company

Risk Factors

✓ Business risk (operational)
✓ Financial risk (leverage)
✓ Market risk (systematic)
✓ Size risk (small company)
✓ Industry risk (sector-specific)
✓ Liquidity risk (marketability)

Typical Discount Rates

Government Bonds: 3-5%
Large Cap Stocks: 8-12%
Small Cap Stocks: 12-18%
Private Equity: 15-25%
Venture Capital: 20-40%
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Understanding Discount Rates

The discount rate is the interest rate used to determine the present value of future cash flows, reflecting the time value of money and investment risk.

  • Risk Reflection: Higher rates for riskier investments
  • Time Value: Accounts for opportunity cost of capital
  • Investment Decisions: Critical for NPV and DCF analysis
  • Cost of Capital: Represents minimum required return

Choosing the Right Method

WACC Method

Best for companies with both debt and equity financing. Reflects the blended cost of capital.

CAPM Method

Ideal for publicly traded companies with reliable beta estimates and market data.

Build-up Method

Perfect for private companies or when market data is limited. Allows for specific risk adjustments.

Professional Guidance

Consider consulting with financial professionals for complex valuations and investment decisions.