What discount rate should Procter and Gamble use for its acquisition forecast in Columbia?

When determining the appropriate discount rate for an acquisition forecast, it's important to consider the risk profile of the investment, the cost of capital, and the typical returns expected in the specific market. For Procter and Gamble's acquisition forecast in Columbia, using a discount rate of 12-14% reflects a reasonable balance between the expected returns necessary to justify the investment and the perceived risks associated with acquiring and operating in that regional market.

This range takes into account the cost of capital, historical market returns, and country-specific risks, such as economic stability, regulatory environments, and potential market volatility in Columbia. A discount rate within this range also aligns with common practices in corporate finance where higher rates are employed for riskier ventures, ensuring that future cash flows are appropriately weighted against their present value to support sound decision-making. As such, choosing this discount rate enables Procter and Gamble to effectively evaluate the profitability and feasibility of the acquisition.