cost of capital

Posted: 04 Aug 2007 09:07
Registered User Currently Offline	Posts: 1 Join Date: Aug 2007
Hi there, I am relatively new in the world of investing and right now, i'm trying to figure out how to use appropiately the DCF model for valuation. I've read in Hagstrom's book that Buffett uses for the cost of capital either the risk-free US long term bond yield (whenever it is above 7%), or about a 10% cost of capital (when the long term bonds yield under 7%). I think i get his logic, but the problem I got is that I am a foreigner and live in a country where the inflation rate oscillates from 9% to 15%.I tend to use the inflation rate plus a premium, both for investments made in my country and for the US, but i'm not sure if that's allright. What should my cost of capital be in the dcf, both for local and foreiner investments?