What is the Discount Rate?
The discount rate is the factor used to adjust (discount) future sums of money into the equivalent current year dollar amount. It can also be thought of as the interest rate or hurdle rate (i.e., the rate of return required by a company for it to undertake a project). FEDS uses the real discount rate, which has the effect of inflation removed. FEDS provides the current Federal real discount rate as the default, but the user may enter any discount rate appropriate for their projects. Energy service companies performing shared energy savings contracts typically require real rates of return in the neighborhood of 10 to 20%.