This is an excellent post from Prof. on how low government bond rates impact intrinsic valuation-- especially calculations using discounted cash flow.
Low rates artificially inflate the computed intrinsic value, by suppressing the discount rate. One clear way to avoid this pitfall is to simply use 6.67% no matter what the risk free rate is. 6.67% is approximately the rate of return of S&P 500 over a 100 year period. It would be a safe assumption that S&P 500 will not achieve 6.67% growth in the 21st century, having a higher rate provides some inherent margin of safety into the calculation.
Other option is to be very conservative and choose a static, and yet, reasonable high discount rate eg: 12% or 15%.
Of course, regardless of the discount rate you choose, never forget to apply a margin of safety factor to your valuation to come up with a target buy price.
