As a discounted cash flow method does not report good operating income results in the project's early years, managers are tempted to not use discounted cash flow methods even though the decisions based on them would be in the best interests of the company as a whole over the long run.

Question

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Discounted cash flow method takes into consideration the present value of future cash flows, which usually results in lower reported income in the early years of a project. This can discourage managers who focus on short-term performance from using the method, even if it would benefit the company in the long run.

As a Discounted Cash Flow Method Does Not Report Good