Who receives the cash flow?
Cost of equity represents the return required by equity investors. A weighted average cost of capital, or WACC, combines the costs of the relevant capital sources, including debt and equity. They answer different questions and should not be used interchangeably.
Choose consistent inputs
A model should explain its capital structure, financing costs and treatment of tax. Market evidence, currency and the valuation date matter. A rate copied from another company may fail to reflect the subject business or the cash flow being valued.
Avoid counting the same risk twice
A conservative cash-flow scenario and a higher discount rate may both reflect the same uncertainty. Review adjustments together, explain their rationale and show sensitivity. Precision to several decimal places is less useful than a transparent explanation of the choices.
Further reading
NYU Stern · Valuation resources (opens in a new tab)For general understanding. The appropriate method, professional appointment and regulatory treatment depend on the purpose, date and circumstances of the engagement.