Of the following techniques of capital budgeting,which one explicitly incorporates an estimate of an interest rate into the basic computation?

Question

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The discounted cash flows method explicitly incorporates an estimate of an interest rate into the computation by discounting future cash flows back to their present value using a discount rate that reflects the time value of money. The payback method and average rate of return do not consider the time value of money, and the accounting book value method uses accounting measures rather than cash flows and interest rates.

Of the Following Techniques of Capital Budgeting,which One Explicitly Incorporates