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Discount Factor Formula

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Discount Factor refers to a variable used in discounted cash flow (DCF) analysis to adjust future cash flows to their present value. Check FAQs

DF = \frac{1}{1 \cdot {(1 + DR)}^{n}}

DF - Discount Factor?DR - Discount Rate?n - Number of Periods?

Discount Factor Example

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Here is how the Discount Factor equation looks like with Values.

Here is how the Discount Factor equation looks like with Units.

Here is how the Discount Factor equation looks like.

0.7972 = \frac{1}{1 \cdot {(1 + 0.12)}^{2}}

0.7972 = \frac{1}{1 \cdot {(1 + 0.12)}^{2}}

0.7972 = \frac{1}{1 \cdot {(1 + 0.12)}^{2}}

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Discount Factor Solution

Follow our step by step solution on how to calculate Discount Factor?

FIRST Step Consider the formula

DF = \frac{1}{1 \cdot {(1 + DR)}^{n}}

Next Step Substitute values of Variables

∴

DF = \frac{1}{1 \cdot {(1 + 0.12)}^{2}}

Next Step Prepare to Evaluate

∴

DF = \frac{1}{1 \cdot {(1 + 0.12)}^{2}}

Next Step Evaluate

∴

DF = 0.79719387755102

LAST Step Rounding Answer

∴

DF = 0.7972

Discount Factor Formula Elements

Variables

Discount Factor

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

Symbol: DF

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Discount Factor

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.

Symbol: DR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Discount Rate

Number of Periods

Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

Symbol: n

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Number of Periods

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How to Evaluate Discount Factor?

Discount Factor evaluator uses Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods) to evaluate 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 evaluate Discount Factor using this online evaluator? To use this online evaluator for Discount Factor, enter Discount Rate (DR) & Number of Periods (n) and hit the calculate button.

FAQs on Discount Factor

What is the formula to find Discount Factor?

The formula of Discount Factor is expressed as Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods). Here is an example- 0.797194 = 1/(1*(1+0.12)^2).

How to calculate Discount Factor?

With Discount Rate (DR) & Number of Periods (n) we can find Discount Factor using the formula - Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods).

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Discount Factor Formula

Discount Factor Example

Discount Factor Solution

Discount Factor Formula Elements

Other formulas in Basics of Financial Accounting category

How to Evaluate Discount Factor?

FAQs on Discount Factor

Variable Name