Update or Discount Rate Concept

The update rate concept (also known as discount rate) is associated to the companies’ appreciation, of business and investment projects, being the rate applied to the future income or cash-flows as a way to obtain its current value. Being indifferently used as update rate of future incomes or as capitalization rate, this rate can be understood as the prize demanded by the investors as way of risk compensation and uncertainty as to the receiving of future benefits. Therefore, on its estimate is included not only an interest rate without risk, but also a risk rate demanded by the investors for the type of company or project at issue.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.