How would you estimate risk-free rate when valuing an international firm?

You need the risk-free rate to arrive at the WACC or discount rate at which you will discount your cash flows in a DCF valuation model. How will you pick your discount rate?

You must pick the risk-free rate of the currency in which you are valuing an international firm. For example, if you are valuing the company in US dollars, you would go with the US risk-free rate. If you are valuing the company in Mexican Pesos, you will use the risk-free rate in Mexico.

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