I would like to calculate a present value of a stream of earnings using the following criteria: * Discount period is 25 year period; * Earnings are fixed in 5 year increments; * Earning also every 5 years (10% increase).
Issue:
What is an appropriate Discount Rate?
* Federal Risk Free Rate; * Present Borrowing Rate experienced by the Company; * Compound annual growth rate for the past 25 years; * Some Other Factor?
Please advise.
Comments for
Discount Rate for a Net Present Value Project
Choosing a discount rate can be somewhat subjective. It can depend on the goals of your organization. It therefore becomes an art rather than a science. A discussion of hurdle rates (discount rates) can be found at:
