How to determine discount rate for valuation
To calculate WACC, one multiples the cost of equity by the % of equity in the company’s capital structure, and adds to it the cost of debt multiplied by the % of debt on the company’s structure. Because interest in debt is a pre-tax expense, the cost of debt is reduced by the tax rate (it’s effectively tax deductible). What Discount Rate to Use to Determine the Present Value of a Stock? October 27, 2015 By DivGuy 2 Comments With the popularity of the Dividend Toolkit , I often get questions by email regarding what is a “fair” discount rate to use to calculate the present value of a stock.