Discounting cash flows involves:

Question

Quizplus · Accepted Answer

Discounting cash flows involves adjusting all expected future cash flows to their current value. This is done by using a discount rate, typically the cost of capital, to calculate the present value of future cash flows. Option A is incorrect as it refers to a different type of cash discount. Option B is incorrect as it suggests a limited time horizon and ignores cash flows beyond the first four years. Option C is incorrect as it ignores cash flows that occur before the ten-year mark. Option D is incorrect as it only considers the cost of capital and does not adjust for the timing of cash flows.

Discounting Cash Flows Involves