Know the difference between discount and capitalization rates

Maddox, Darrin
December 2008
Las Vegas Business Press (10712186);12/8/2008, Vol. 25 Issue 49, pP30
The article explains the difference between discount and capitalization rates. According to the author, both discount and capitalization rates find their basis in the concept of risk and reward. He says that in order to justify taking the risk of purchasing said investment, the rate of return an investment offers must be high enough. In terms of required rate of return, discount rate pertains to required rate of return. On the other hand, the capitalization rate equals the discount rate, minus growth.


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