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A cost of capital can be used to derive discount rate for discounted cash flows.
This is book verse.
How can it be possible? Discounted rate tells us the discounted cashflow in past. Cost of capital is amount used by company for its finance.A company’s current cost of capital is a measure of how much it has to pay suppliers of capital. In a simple case, this is the interest rate it must pay lenders.
If a project is being considered it should only be accepted if it has a positive NPV. A positive NPV means that the company will be left with additiinal cash even after paying what the suppliers of capital demand.
Professor can another reason be that, Supplier will try to achieve at least cost of capital which is equal to discount rate. Discount rate shows time value of money so supplier may need a interest which can fulfil their investment loss with time.
The supplier of capital will want a return that covers the tine the capital is supplied for and the risk to which it is exposed.
Like much, the cost of finance depends on market forces: how much is available and how much is wanted. These influences determine the cost of the finance.
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