{ "media_type": "text", "post_content": "Hi I am an undergrad student and was assigned a case study to find the npv of 175 mortgages given the estimated cash flows. I was wondering what in industry people might use as the discount rate or the wacc. Thanks so much", "post_id": "5f6bde4279e87c00205729ee", "reply_count": 17, "vote_count": 2, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting", "feed_type": "crowd" }

Hi I am an undergrad student and was assigned a case study to find the npv of 175 mortgages given the estimated cash flows. I was wondering what in industry people might use as the discount rate or the wacc. Thanks so much

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Posting as :
works at
You are currently posting as works at

But it says you’re a consultant

funny

I don’t think someone would fake being an associate but ok

Don’t assume anything. Instead create a sensitivity table where one of the axes is WACC. Pow, you’ve just de-risked yourself from having a wrong number and demonstrated you have sick excel skills.

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Full disclosure: MC1 had the best answer. Kanye mic drop.

I usually use 5-8% on financial models

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Take the typical interest rate on US mortgage today, add like a 1-2% risk premium and there you go. If I’m not mistaken, that should net out to like 3-5% (2-3% for mortgage interest rate and then you add in the risk premium). Can probably be more conservative if you want and add a higher risk premium in

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Why is there an undergrad student here? 🧐

funny

6.9%

helpful

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The cost of debt for the party making the mortgage payments could be a good proxy.

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