At Morningstar, we use 10.5 percent as the discount rate for an average company based on the factors in the preceding list, and we create a distribution of discount rates based on whether firms are riskier or less risky than the average. As of mid-2003, firms such as Johnson & Johnson, Colgate, and Wal-Mart fall at the bottom of the range, at around 9 percent, whereas riskier firms—such as Micron Technology, JetBlue Airways, and E*Trade—top out at 13 percent to 15 percent.
