Use either the yield on a 10-year US Treasury bond plus 5 percent or the weighted average cost of capital to calculate the discount rate. The discount rate is defined for investors as the rate at which dollars in the future are brought back to their present value.
Know MoreSimply put, the discount rate is equal to the interest rate it will take to make a sum of money today equal to a value in the future, just applied in reverse. For example, if a person wants to have $100 two years from now and the current rate is 5 percent, then he should invest $90.70 today in order to reach that goal. Therefore, the discount rate of 5 percent is applied to the $100 amount in order to bring it back to the current value of $90.70. All of those calculations simply mean that $100 is worth $90.70 today.
The discount rate varies depending on who is doing the calculations. Different discount rates give different present-day values. The larger the rate, the lower the value. Some investors prefer to use a larger discount rate, especially for risky securities like small cap stocks. Future cash flows with these types of investments tend to be more volatile, and a larger discount rate gives investors a bit of a cushion.
Learn more about Math CalculatorsTo calculate beginning inventory, evaluate the cost of products available for sale at the start of the accounting period. Use previous accounting records to subtract the cost of goods sold and previous closing inventory from the total inventory.
Full Answer >To calculate the price per pound, the total price is divided by the weight in pounds. For example, if 3 pounds of apples cost $5, then $5 is divided by 3 to arrive at the price per pound of $1.67.
Full Answer >Calculating man hours involves determining how much time a project requires and how many employees are needed. The process can be completed before or after a project, and this example determines man hours after a project's completion. The calculations take a few minutes and require a calendar and a calculator.
Full Answer >The basic formula for contribution per unit is total revenue minus total variable costs divided by the total units. Contribution per unit describes how the sale of one unit affects a company's net income. Contribution per unit is also known as contribution margin per unit.
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