Discount rate
The rate used to translate future cash flows into present value. It must be consistent with the cash flows’ risk, timing, currency and claim basis.
Discount rate in round numbers
Hypothetical: one US$40,000 payment exactly one year from now is discounted at a 10% annual rate on a consistent basis. Present value is 40,000 ÷ (1 + 0.10) = US$36,363.636, rounded to US$36,364.
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| Input / result | Value |
|---|---|
| Payment in one year | US$40,000 |
| Annual discount rate | 10% |
| Present value | US$40,000 ÷ 1.10 ≈ US$36,364 |
Terms Related to Discount rate
NPV · DCF · WACC · All of the glossary