§ Cost of capital
Discount rate
Glossary version 2026-07-12.v1 · reviewed July 12, 2026
The required return used to convert future cash or earnings into today’s value. Higher perceived risk means a higher discount rate and, all else equal, a lower valuation.
A discount rate translates future money into present value while accounting for time and risk. Equity-value models normally use cost of equity, while enterprise-value models using FCFF normally use WACC. Because small rate changes can move long-duration valuations materially, every report shows the rate used and tests nearby values in sensitivity analysis.