Discounted Rate of Return Taking into account the time value of money, the discount rate describes the interest percentage that an investment may yield over its lifetime. For example, an investor expects a $1,000 investment to produce a 10% return in a year.
What is the Discount Rate and Why Does It Matter? - SmartAsset.com
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In general, a higher the discount means that there is a greater the level of risk associated with an investment and its future cash flows. ... In other words, future cash flows are discounted back at a rate equal to the cost of obtaining the funds required to finance the cash flows.
Discounting Definition - Investopedia
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How to calculate discount rate. There are two primary discount rate formulas - the weighted average cost of capital (WACC) and adjusted present value (APV). The WACC discount formula is: WACC = E/V x Ce + D/V x Cd x (1-T), and the APV discount formula is: APV = NPV + PV of the impact of financing.
Discount Rate Formula: Calculating Discount Rate [WACC/APV]
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The Discount Rate and Monetary Policy A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in available credit and lending activity throughout the economy.
Federal Discount Rate Definition - Monetary Policy - Investopedia
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