what is the discount rate really? How is it different from the cost of capital (eg if cost of capital is 10%)
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success
Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Interview Partners to connect and practice with!
Back to overview
44
14
31
Be the first to answer!
Nobody has responded to this question yet.
Cost of capital is one type of discount rate.
Essentially, the discount rate is saying “what could we earn on this money if we spent it elsewhere”? That's literally why the NPV equation exists…to compare our investment to alternatives!
As such, the discount rate is determined by the company/case. It could be set based on the cost of capital, the cost of equity, the interest rate, the hurdle rate, etc. etc!
Sign up for free to read all answers.
Sign up for free to read all answers.
Similar Questions
Consulting
Trying to understand what type of case question it is
on Aug 06, 2021
Global
4
3.1k
4 Answers
3.1k Views
Consulting
How to approach the following type of questions?
on Aug 07, 2021
Global
2
1.7k
2 Answers
1.7k Views
Consulting
How to solve a case if the industry / sector is completely new to you?
on Sep 13, 2021
Global
9
2.0k
9 Answers
2.0k Views
Expert case by