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© 2019 Excel Model Shop

Discount rate calculator

Purpose

A guide to calculate a discount rate. The methodology is based on the weighted average cost of capital (WACC). That is the weighted average cost of debt and cost of equity. The cost of equity is based on the academic CAPM methodology

 

How to use the tool

Enter assumptions into the yellow cells and the calculated discount rate will be presented in the pink results section

 

Assumptions

Assumptions to enter include:

- Risk free rate

- Equity beta

- Equity risk premium

- Various components to adjust alpha

- Debt interest rate

- Tax rate

- Debt:equity ratio

 

Calculations

The CAPM equation is included in the tool to demonstrate how the above assumptions are used to calculate CAPM

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