What discount rate do you use in your valuations?
Hi guys, was hoping I could get some insight on this esp. from those buysiders at long only value shops
i currently work on the buy side focusing on resource sector companies, I don't think I've ever calculated a company's WACC outside of my MBA studies, we always use a 10% discount rate. The generalists in my shop do the same thing, however they always debate the merits of using an arbitrary 10%, but at the end of the day the end up using 10% for valuations with the arguement that it allows them to compares valuations for different companies in the same sector
Currently I'm evaluating a Company outside the resource sector, initially when I ran the valuation I used a 10% discount rate...just because that's what I always use. I calculated the Company's WACC, and it comes out to just under 6%...this makes a huge difference to my valuation. Obviously there's a lot more rational to using WACC over an arbitrary 10%, just wondering how other people look at non-resource companies