The discount rate is actually the interest rate used to "discount" future cash flows to their present, i.e. today's, value. Mathematically, the process is the reverse of compounding a "principal" amount forward by the same interest rate.

The cost of capital, by definition, is not related to the discount rate of an annuity. Rather, it is basically an organization's cost of borrowing money.

In solving Net Present Value (NPV) problems for annuities, such as the Lease Value Problem, it is customary to set the discount rate equal to ones cost of capital.