Told my MD how I got the discount rate

Bit rambly below, but just had my coffee so felt like adding a devil's advocate view.

Ironically I could make an argument that retail good discounts 'should' be capped at the company's discount rate. Like I think there's a weird form of correlative logic here. 

Stay with me... I sell a good for $100, if I had 0 operating costs and 0 taxes then this 'profit' would go straight to the capital holders (for simplicity of this example, assume it's 100% equity funded, I put in $100 initially as equity capital).

Means my $100 is straight to equity with a 100% return. 

If it produces another $100 the following year, then that return is 100/200, making it a 50% return. 

Another year goes by, 100/300, 33%.

Another 100/400, 25%

Another 100/500, 20%

Another 100/600...100/700...100/800...100/900...100/1000

Now each year the return on my capital base is less than 10% after 100/1000.

However I also realise if I can discount my product so that I can sell another one (via price elasticity of demand).  The 'most' I can discount it and still be worth it to my bottom-line is the amount of return. e.g. discount original by 10% on 100, I can sell two for 90, so I get 180. 180/1100 > 100 / 1100. There is then a relationship between the discount rate on the product vs. the return implied on capital. 

Now the world is more complex than this and there is operating costs, tax etc, and I probably messed the math up along the way (hence it's more of a wobbly correlative effect), but I do think that if I had a rational, well-run retailer, they should be able to discount to the max of their cost of capital pre-price elasticity if there is a chance they will get more sales in an efficient manner (i.e. this is a management mechanism where you can push RoE > CoE, in fact this is the basis of a cost-led strategy anyhow and why digital products > physical, because it's not necessarily the 'price' that they win on, it's the 'cost' it takes to run the operation at the end).

Separately, if you whack in a 10% you're going to be pretty much right. If historical cost of equity is 4-6%, and long-term debt rounds out to target inflation of 3%+ (i.e. I believe the 'real' risk free rate should theoretically net out to 0 in the long-run which I guess reflects a philosophical view similar to ZeroHedge, but in reality there is no such thing as a real 'risk free' return in the long-run, because I can break it by simply say human civilisation will collapse some point in the future, and hence the rate at that time will cease to exist, hence there's a risk, even if it's infinitesimally small, thus everything else is just arbitrary approximation for 'optics') then your long-term wacc ends up around there anyhow (also there's a certain mathematical symmetry implied by a 10% discount rate that makes pitches cleaner when you forecast out time periods etc that bankers tend to love).