![]() ![]() In corporate finance, a firm's weighted-average cost of capital is often used to determine the discount rate.This is called your "discount rate" and is expressed as a decimal, rather than a percent. This concept is called the “time value of money.” For NPV calculations, you need to know the interest rate of an investment account or opportunity with a similar level of risk to the investment you're analyzing. In other words, it's better to have $10 today than $10 one year in the future because you can invest your $10 today and have more than $10 in a year. This is because the money you have today can be invested in an interest-earning account and gain value over time. In general, a given amount of money is worth more now than it is in the future. This article has been viewed 800,498 times.ĭetermine the appropriate discount rate. In this case, 100% of readers who voted found the article helpful, earning it our reader-approved status. WikiHow marks an article as reader-approved once it receives enough positive feedback. There are 14 references cited in this article, which can be found at the bottom of the page. Jonathan has been featured in the New York Times, the Wall Street Journal, Money Tips, Mindful Magazine, and Business Insider among others. ![]() He also earned his Accredited Investment Fiduciary (AIF®) credential from Fi360. He studied Financial Analysis at the CFA Institute and earned his Certified Private Wealth Advisor (CPWA®) designation from The Investments & Wealth Institute. With over 25 years of financial advising experience, Jonathan is a speaker and the best-selling author of "Mindful Money: Simple Practices for Reaching Your Financial Goals and Increasing Your Happiness Dividend." Jonathan holds a BA in Philosophy and Religious Studies from Montana State University-Bozeman. Jonathan DeYoe is a Financial Advisor and the CEO of Mindful Money, a comprehensive financial planning and retirement income planning service based in Berkeley, California. This article was co-authored by Jonathan DeYoe, CPWA®, AIF® and by wikiHow staff writer, Megaera Lorenz, PhD. ![]()
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