Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.

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Free cash flows, which are the cash flows available to investors after all expenses have been paid, should be adjusted for both risk and the time value of money in order to accurately calculate the present value of a venture. Taking into account the risk involved in a project and the time value of money allows for a more precise assessment of the project's worth.

Free Cash Flows Are Adjusted for Risk and the Time