Traditional discounted cash flow (DCF)analysis--where a project's cash flows are estimated and then discounted to obtain an expected NPV--has been the cornerstone of capital budgeting since the 1950s.However,in recent years,it has been demonstrated that DCF techniques do not always lead to proper capital budgeting decisions due to the existence of real options.

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This statement is true. Real options refer to the flexibility a manager has to adapt to changing market conditions or other uncertainties. Traditional DCF analysis does not take into account the value of these real options, which can sometimes lead to faulty capital budgeting decisions.

Traditional Discounted Cash Flow (DCF)analysis--Where a Project's Cash Flows Are