What discount rate should I use in a machinery comparison?
The discount rate is the after-tax return your own money would earn if you spent it elsewhere, so it is your assumption, not the tool's. The sheet asks for it, never defaults it, and runs a rate sensitivity two points up so you can see whether the ranking flips.
What discount rate does the sheet use?
Yours. The farm and tax profile box takes the after-tax discount rate, and the sheet discounts every option at that one rate so the three are compared on the same footing. A blank discount rate returns scope incomplete and names the field, because a rate nobody chose would pick the answer.
Why does the sheet show a rate sensitivity?
Because where two options are close in today dollars, a small move in the rate can change the order. The sensitivity box runs the comparison at a rate a few points higher and shows beside the headline whether the cheapest option is still the cheapest.
Frequently asked questions
What if I do not know my discount rate?
That is a question for your accountant, not for the tool. Put in a rate you can defend, run the sensitivity, and see whether the ranking holds. The sheet will not default the rate, so the answer is never built on a number nobody chose.
Does the discount rate change which option is cheapest?
Sometimes. Where two options are close, a higher or lower discount rate can change the order, which is why the sensitivity run sits beside the headline. Where the gap in today dollars is wide, the ranking usually holds.
Related answers
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- How do I compare two dealer quotes for the same tractor?
- How long should I finance a farm machine or tractor?