Factsheet 3 in the global economic downturn series Discounted Cash Flows (DCF) analysis highlights the importance of Beta (ß) and discount rates in calculating the DCF.  
 
This factsheet Use of beta and discount rates in Discounted Cash-Flow analysis, written by Antoni Kaliszewski and Katalin Toth FCA of KMT Partners Chartered Accountants Adelaide, examines the measurement of Beta and that of discount rates in more detail.  
 
The factsheet examines the impact of the global economic downturn on the cost of equity and the cost of debt along with the impact to the weighted average cost of capital (WACC) which, according to a recent McKinsey Quarterly article, ‘(the cost of capital) has not changed significantly in the last 60 years.’  
 
Kaliszewski and Toth also provide practical models for members that define WACC and the expected return on equity equation using the capital asset pricing model.  
 
The suite of global economic downturn factsheets are published on the Institute’s website in the section dedicated to global economic downturn resources. 
 
Relevant links:

• The Institute: Use of beta and discount rates in Discounted Cash-Flow analysis
• The Institute: factsheet eight - Change management in tough times
• The Institute: factsheet seven – Using EBIT multiples
• The Institute: factsheet six – Enforcement of judgment debts
• The Institute: factsheet five – Banking on relations
• The Institute: factsheet four – Part two, insolvency
• The Institute: factsheet four – Part one, insolvency
• The Institute: factsheet three – Discounted cash flow analysis
• The Institute: Guidance document on impairment to accompany factsheets three and seven
• The Institute: factsheet two – Employee matters
• The Institute: factsheet one – Trim the fat not the staff
• The Institute: Global economic downturn resource page