What Is A Discount Rate?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

A discount rate is the rate of interest used in a DCF to convert future cash flows into a present cash value.

The discount rate has to take into account the risk of future cash flows, as well as the time value of money (i.e. cash now is worth more than the same amount of cash in the future).

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.