DISCOUNT BROKER a licensed broker who provides brokerage services for a lower commission than that typical in the market. Generally, the services provided are less extensive than those of a full service broker or may be unbundled, so that a client may contract for specific services. Many discount brokers charge a flat fee rather than a percentage of the selling price. See FLAT FEE BROKER. Example: Henson, a discount broker, offers to list a property for a 3% commission. Henson will refer prospective buyers to the seller and prepare a sales contract. The seller is expected to show the property and negotiate directly with the buyer.
DISCOUNTED CASH FLOW a method of investment analysis in which anticipated future cash income from the investment is estimated and converted into a rate of return on initial investment based on the time value of money. In addition, when a required rate of return is specified, a net present value of the investment can be estimated. Example: An asset may be purchased for $1,000. It is expected to generate $100 in income per year for 10 years, after which time it is expected to sell for $1,200. Discounted cash flow analysis shows that the internal rate of return on the investment is expected to be 11.2% per year.