Question

Which of the following methods of calculating investment returns are discounted cash flow (DCF) techniques?

A) Net present value (NPV).
B) Holding period return (HPR).
C) Internal rate of return (IRR).
D) All of the above.

Answer 1

Net Present Value (NPV) and Internal Rate of Return (IRR) are discounted cash flow (DCF) techniques used for investment analysis, while Holding Period Return (HPR) is not.

Step-by-step explanation:

The discounted cash flow (DCF) techniques for calculating investment returns include Net Present Value (NPV) and Internal Rate of Return (IRR). These methods involve discounting future cash flows to their present value to evaluate the attractiveness of an investment. While NPV provides a dollar value representing the net value of an investment's cash flows discounted back to the present, IRR calculates the rate of return at which the present value of those cash flows would be zero. Holding period return (HPR), on the other hand, is not a discounted cash flow technique as it represents the total return from an investment over a particular period without discounting future values.