Warren Buffett’s Discount Rate

Question: When you estimate intrinsic value in capital intensive companies like McDonald’s and Walgreens where a very healthy and growing operating cash flow is largely offset by expenditures for new stores, restaurants, etc how do you estimate future free cash flow? And at what rate do you discount those cash flows? Warren Buffett: We use […]

Buffett’s Hurdle Rate

Question: What’s your investment hurdle rate? Warren Buffett: 10% is the figure we quit on — we don’t want to buy equities when the real return we expect is less than 10%, whether interest rates are 6% or 1%. It’s arbitrary. 10% is not that great after tax. [CM: We’re guessing at our future opportunity […]