Discounted cash flow valuation is the process of discounting an investment's:
A)assets.
B)future profits.
C)liabilities.
D)costs.
E)future cash flows.

Question

Quizplus · Accepted Answer

Discounted cash flow valuation involves estimating the future cash flows that an investment will generate and then discounting those cash flows back to their present value using an appropriate discount rate. This process accounts for the time value of money, as well as the risk associated with the investment, in order to determine a fair value for the investment. The discounted cash flows should take into account any potential costs or liabilities associated with the investment, but the primary focus is on estimating future cash flows. Therefore, the correct choice is E, future cash flows.

Discounted Cash Flow Valuation Is the Process of Discounting an Investment's