discount factor

discount factor(present-value factor) A factor that, when multiplied by a particular year’s predicted cash flow, brings the cash flow to a present value. The factor takes into consideration the number of years from the inception of the project and the hurdle rate that the project is expected to earn before it can be regarded as feasible. The factor is computed using the formula:

where r is the hurdle rate required and t is the number of years from project inception.

In practice there is little necessity to compute discount factors when carrying out appraisal calculations as they are readily available in discount tables. Most computer spreadsheet programs now include a discounted cash flow routine, which also obviates the need for using discount factors.

• standard direct materials cost
• standard direct materials price
• standard fixed overhead cost
• standard hour
• Standard Industrial Classification
• standardization strategy
• standardized marketing mix
• standard marginal costing
• standard materials usage
• standard mix
• standard operating profit
• standard overhead cost
• standard performance
• standard production cost
• standard purchase price
• standard rate
• standard selling price
• standard time
• standard variable overhead cost
• standby agreement
• standby credit
• standing order
• standstill agreement
• start-up
• start-up costs