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# Discount Rates

## The effect of single vs. multiple discounts.

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A discount is a deduction in percentage from the original price offered by the supplier.

• the base is the original price of the item - or the "list price"
• the price after discount is the "net price"

### Single Discount

A single discount can be estimated as

N = L (1 - i /100)                          (1)

where

N = net price

L = list price

i = discount rate (%)

#### Example - Single Discount Rate

With a list price of 500 and a single discount rate of 25% - the net price can be calculated as

N = (500) (1 - (25%) /100)

= 375

### Multiple Discounts

Discounts are often offered in multiple terms. The net price with multiple discounts can be calculated as

N = L (1 - i1 / 100) (1 - i2 / 100) ... (1 - iN / 100)                        (2)

where

i1..N = discount rate for term (%)

#### Example - Multiple Discount Rate

With a list price of 500 and a two multiple discount rates of 25% and 10% (25 - 10) - the net price can be calculated as

N = (500) (1 - (25 %) / 100) (1 - (10 %) / 100)

= 337.5

### Single and Multiple Discounts Table

The table bellow can be used as a shortcut to calculate net price with multiple discount terms.

Discount
(%)
Net Price Factor
10 0.9
10 - 10 0.81
20 0.8
20 - 5 0.76
20 - 5 - 5 0.722
20 - 10 0.72
20 - 10 - 10 0.648
25 0.75
25 - 5 0.7125
25 - 5 - 5 0.6769
25 - 5 - 10 0.6413
25 - 10 0.675
25 - 10 - 5 0.6413
25 - 10 - 10 0.6075
25 - 10 - 10 - 5 0.5771
30 0.7
30 - 5 0.665
30 - 5 - 5 0.6318
30 - 5 - 10 0.5985
30 - 10 0.63
30 - 10 - 5 0.5985
30 - 10 - 10 0.567

### Example - Net Price with 25%, 10%, 10%

The net price of a list price 500 with multiple discount rates as 25%, 10%, 10% and 5% - or (25 - 10 - 10 - 5) in the table above - can be calculated as

N = 0.5771 (500)

= 289

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## Related Topics

• Economics - Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.

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