im currently at university and have a question in regards to why an industry discount rate should be used when applying to a new project over another close rival company??

what problems could arise from this do you think??

Thankyou for your time

I am telling you this because , you shouldn’t expect to profit from discounting future cash flows UNLESS price follows value.

i.e PFE has increasing Owner Earnings in past decade, but price has dropped alot). You must figure out why? (Overall Market Pessimism on the industry as a whole and the particular company due to Numerous patent losses that protected those enormous Profit margins)

In sum, in the case of an outstanding business price WILL follows value, YET we do not know WHEN this is going to happen and IF ( investing in stocks has inherent risks).

Case in point, I would like to conclude that TIME is the enemy of the wonderful business and the enemy of the mediocre. As a result, your best bet on OBTAINING your desired rate of return(by discounting) is that you hold the company for the LONG-TERM.

Ani, Joe’s has taught me the fundamentals of the DCF, which in return, has allowed me to improving my learning curve substantially! Joe has consistently helped us by referring us in the right directions (i. e theories, real-world examples, HIGHLY important books(Fisher’s for example) and Gurus that are worth further analyzing. Those are a few areas, this website should help you out!

I know I’ve said it numerous times, I will repeat it as long as Joe serves our community: THANK YOU, I wish you the best in Life and I hope to meet with you one day when I have ample positions in myNon-Conventional Portfolio (which Joe has helped me build by referring me to the right direction! i.e theories, specific books etc)

I am great fan of your blog, I learned very good things like DCF here. I am using my own calculations with 12.5% of Discount Rate & 50% margin of Safety. Using this i am buying my stocks. How would you like to comment on this strategy?

Kind regards

Ani