What Discount Rates Will You Go About Using?

1.	What Discount Rates Will You Go About Using?
Answer» If you are doing a DCF, then you would use a WACC, since it accounts for both Debt and Equity capital and the CASH flows you are discounting are "pre-financing" and do not already INCLUDE interest EXPENSE If you are doing a DCF For a DDM, then you would use just the Cost of Equity since the cost of debt has already been TAKEN into account in the cash flows that you are discounting.

Answer»

If you are doing a DCF, then you would use a WACC, since it accounts for both Debt and Equity capital and the CASH flows you are discounting are "pre-financing" and do not already INCLUDE interest EXPENSE
If you are doing a DCF For a DDM, then you would use just the Cost of Equity since the cost of debt has already been TAKEN into account in the cash flows that you are discounting.

Discussion