Discount Rate

The discount rate is the interest rate used to determine the present value of future cash flows. Essentially, it reflects the opportunity cost of investing money today rather than later, accounting for risks and potential returns. A higher discount rate means future money is worth less today, as the investment's risk or alternative costs are greater. It's a key concept in finance for valuing investments, projects, or assets by translating future benefits into today's dollars, helping investors and companies make informed decisions.