Discount Rate
Definition
The rate used to convert future expected cash flows into their present value, reflecting the time value of money and the risk associated with those cash flows. Selecting the appropriate discount rate is one of the most critical and sensitive decisions in intangible asset valuation, as small changes can materially alter the estimated fair value.
Related Terms
Related FAQ
What is obsolescence risk and why does it matter in technology valuation?
Obsolescence risk is the danger that technology becomes outdated or superseded, reducing its useful life and economic value — higher for proprietary tech, lower for platforms.
Read full answer →What is the weighted average cost of capital (WACC)?
WACC is the average cost of all capital sources (debt and equity) a company uses, weighted by their proportions — it is the minimum return the company should generate to satisfy all investors.
Read full answer →How do private equity firms value portfolio companies?
PE firms typically use a combination of EBITDA multiples, discounted cash flow (DCF) analysis, and comparable transactions, with increasing focus on identifying and valuing intangible assets that drive sustainable growth.
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