How do you determine the discount rate for your analysis? An easy question to ask and a somewhat tricky one to answer. My thoughts are below. Sound off in the comments section.
First of all, what is the discount rate?
The discount rate is first and foremost an annual rate (expressed as a percentage) that is used to contract (reduce in size) a future projected dollar value to its today’s-equivalent dollar value. At a minimum, assuming annual periods, the discount rate is applied over a single annual period, to discount a value projected to be achieved as of the end of Year 1 back to its perceived dollar value as of Time Zero (i.e., today).
Read more...How To Select A Discount Rate For A Commercial Real Estate Investment | Model For Success, the REFM Blog
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