The discounted payback period takes the time value of money into account in that it uses discounted free cash flows rather than actual undiscounted free cash flows in calculating the payback period.

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The statement is true. The discounted payback period considers the time value of money by using discounted free cash flows instead of undiscounted free cash flows. By using discounted cash flows, the payback period calculation takes into account the fact that money received or paid out in the future is worth less than money received or paid out today.

The Discounted Payback Period Takes the Time Value of Money