Discount rate to be used in Discounted Cash Flow

[continuelearning]

Hi,

In reality, when we would like to value a company using Discounted Cash Flow method, how do we derive the discount rate? and how do we know that if that discount rate used is reasonable?

Thank you.

 

[The Finance Writer]

A reasonable discount rate is the rate available from an alternative to investing in the company. That's a fairly wide open selection by encompassing anything you can reasonably justify. The justification is how you know the selected discount rate is reasonable.