Discount factor, in internal rate of return (IRR), refers to the factor which, when multiplied with a future cash flow, calculates its present value. For instance, if the discount rate is 10% and the cash flow is expected one year from now, the discount factor would be 0.909.
Discount factor plays a crucial role in the IRR calculation and is essential for evaluating investment opportunities and assessing their feasibility. comprehending its relevance benefits and historical development contributes to informed decision-making.