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Definition: In order to determine the value of future cash flows, they need to be "discounted" back to the present to account for the time value of money, inflation, and other risks. The discount rate is used to do this.
Advice: A common discount rate used is the weighted average cost of capital (WACC). Here's an example of a discount:
Let's say you were going to receive $1,100 in one year from now. With a 10% discount rate, what is this worth today?
Answer: $1,000 [$1,100/(1 + 10%)]
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