What is the definition of Discount Rate in the hotel industry?
The term Discount Rate, when used in the Discounted Cash Flow (DCF) examination, refers to the rate by which to concession anticipated future cash flows. The discount rate thereby put across the time value of money and can make the distinction between whether an investment project is monetarily feasible or not. It does this by permitting insight on the current value of expected future cash flow. The concession fee is generally given as a percentage and refers to the interest paid on cash rented. How to compute the discount rate? If no concession rate is given, the discount rate can be found by computing the WACC. A firms weighted average cost of capital (WACC) is used by investors for valuations. It stands for the necessary rate of return that investors anticipate from investing in the corporation. This concession fee is always optimistic, as the basis of the computation is time. .