Discount Rate for New Projects
Discount Rate for New Projects
(OP)
I'm modeling a very large project ($billions). What sort of range of discount factor for cash flow in investment does industry typically use for mammoth projects? I assumed a factor of 8%; but I'd like some other advice. This project is akin to something in the oil and gas refining sector (although not exactly).
Thanks all...
Thanks all...





RE: Discount Rate for New Projects
If the project is to be funded from equity -- i.e. from share issues or retained earnings -- the cost of equity (RE) may be a suitable discount rate. However, if the project is to be funded from a mixture of debt and equity, the weighted average cost of capital (WACC) is probably a suitable discount rate.
A very large resources company that I worked for used a discount rate of just over 6%. By comparison, a junior resources company that I worked for used a discount rate of 10%.
RE: Discount Rate for New Projects
RE: Discount Rate for New Projects
http://www.discountingcashflow.com/