LCM of two numbers

Discount Factor Calculator

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Basics of Financial Accounting Asset Management

✖Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window.ⓘ Discount Rate [DR]			+10% -10%
✖Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.ⓘ Number of Periods [n]			+10% -10%

✖Discount Factor refers to a variable used in discounted cash flow (DCF) analysis to adjust future cash flows to their present value.ⓘ Discount Factor [DF]

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Discount Factor Solution

STEP 0: Pre-Calculation Summary

Formula Used

Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods)
DF = 1/(1*(1+DR)^n)
This formula uses 3 Variables

Variables Used

Discount Factor - Discount Factor refers to a variable used in discounted cash flow (DCF) analysis to adjust future cash flows to their present value.
Discount Rate - Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window.
Number of Periods - Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

STEP 1: Convert Input(s) to Base Unit

Discount Rate: 0.12 --> No Conversion Required
Number of Periods: 2 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

DF = 1/(1*(1+DR)^n) --> 1/(1*(1+0.12)^2)

Evaluating ... ...

DF = 0.79719387755102

STEP 3: Convert Result to Output's Unit

0.79719387755102 --> No Conversion Required

FINAL ANSWER

0.79719387755102 ≈ 0.797194 <-- Discount Factor

(Calculation completed in 00.004 seconds)

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BMS College of Engineering (BMSCE), Bangalore

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Discount Factor Formula

LaTeX Go

Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods)
DF = 1/(1*(1+DR)^n)

What is Discount Factor?

A discount factor is a financial concept used in discounted cash flow analysis to determine the present value of future cash flows. It represents the factor by which future cash flows are discounted to their present value, considering the time value of money. The discount factor is derived from the discount rate and the time period over which the cash flow occurs. Essentially, the discount factor quantifies the decrease in the value of future cash flows as they are brought back to their present value, reflecting the opportunity cost of capital and the preference for receiving money sooner rather than later. As such, it plays a crucial role in evaluating investment decisions, project profitability, and the allocation of financial resources.
In financial analysis, the discount factor typically refers to a variable used in discounted cash flow (DCF) analysis to adjust future cash flows to their present value.

How to Calculate Discount Factor?

Discount Factor calculator uses Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods) to calculate the Discount Factor, The Discount Factor formula is defined as a factor which represents the present value of future cash flows, reflecting the time value of money and the risk associated with receiving cash flows in the future rather than today. Discount Factor is denoted by DF symbol.

How to calculate Discount Factor using this online calculator? To use this online calculator for Discount Factor, enter Discount Rate (DR) & Number of Periods (n) and hit the calculate button. Here is how the Discount Factor calculation can be explained with given input values -> 0.797194 = 1/(1*(1+0.12)^2).

FAQ

What is Discount Factor?

The Discount Factor formula is defined as a factor which represents the present value of future cash flows, reflecting the time value of money and the risk associated with receiving cash flows in the future rather than today and is represented as DF = 1/(1*(1+DR)^n) or Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods). Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window & Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

How to calculate Discount Factor?

The Discount Factor formula is defined as a factor which represents the present value of future cash flows, reflecting the time value of money and the risk associated with receiving cash flows in the future rather than today is calculated using Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods). To calculate Discount Factor, you need Discount Rate (DR) & Number of Periods (n). With our tool, you need to enter the respective value for Discount Rate & Number of Periods and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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