There are two methods to determine the discount rate in DCF model:
a) Weighted Average Capital Cost:
K=We*Ke+(1-We)*Kd*(1-t)
Where, K——weighted average capital cost of the company
Ke——capital cost of equity
Kd——capital cost of long-term debt before tax
We——the ratio of equity to total asset
t —— income tax rate
b) CAPM
Ke=Kf+β*(Km-Kf)
Where, β—— market risk coefficient
Kf —— risk free interest rate
Km —— average market return rate
