Net present value and the payback period are examples of discounted cash flow models used in capital budgeting decisions.

Question

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Net present value (NPV) is a discounted cash flow model used in capital budgeting to assess the profitability of an investment or project. However, the payback period is not a discounted cash flow model; it simply calculates the time it takes for the initial investment to be repaid from the cash inflows, without considering the time value of money.

Net Present Value and the Payback Period Are Examples of Discounted