The one-year discount factor is 0.8333.
In financial modeling, the phrase "discount factor" is most frequently used to calculate the present value of future cash flow values. The future cash flow is multiplied by this weighting factor in order to discount it to the present value. The rate of return that a capital expenditure project must reach in order to be accepted is known as a company's discount factor.
Discount factor is used to determine the net present value of projected future cash flows and to assess how much the investment was worth. The net future value of an investment is calculated using the discount factor, which is also used to calculate the expected profits and losses based on future payments.
Given:
Present value = $480
To be paid at the end of one year = $400
So the discount factor = 400/480
= 0.8333
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