Final answer:
The most appropriate discount rate to use when applying a valuation model depends on factors such as the risk associated with the investment and the desired rate of return. Commonly used discount rates include the Weighted Average Cost of Capital (WACC) and the risk-free rate.
Step-by-step explanation:
The most appropriate discount rate to use when applying a valuation model depends on various factors such as the risk associated with the investment and the desired rate of return. One commonly used discount rate is the Weighted Average Cost of Capital (WACC), which takes into account the cost of both debt and equity financing. WACC is used to discount the future cash flows of a company to their present value.
Another discount rate that could be used is the risk-free rate, which represents the return on a risk-free investment such as a government bond. This rate is typically used as a baseline to determine the minimum rate of return required for an investment.
Ultimately, the choice of discount rate depends on the specific circumstances and assumptions made in the valuation model.