Discounted cash flow methods consider the time value of money while evaluating an investment proposal.

Question

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Discounted cash flow methods, such as net present value (NPV) and internal rate of return (IRR), take into account the fact that money received in the future is worth less than money received today due to factors like inflation and the opportunity cost of capital. Therefore, these methods provide a more accurate assessment of the profitability and value of an investment proposal over time.

Discounted Cash Flow Methods Consider the Time Value of Money