Im in the process of determination of the value of a company in south america, i have the cash flow projection, but i haven't an interest rate to discount the projected cash generated.
Wich Interest rate have to be used to calculate current value of a company 10 years cash flow?
The interest rate you use to discount that cash flow is not a fixed variable. It is dependent upon the companies risk profile and must be assessed on an individual basis. You will be using the rate to discount the investment against risk free investments, so start with what the current t-bill is yielding and add premium to that dependent upon your particular investments risk profile.
My example would be KO, it is a bellwether global company but still receives an 8% discount by my calculation, as to properly offer margin of safety.
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