Final answer:
Discounted cash flow incorporates present costs and the present discounted value of future benefits, such as those related to business investments, government projects, and environmental policies.
Step-by-step explanation:
The items that are part of the discounted cash flow include a set of present costs associated with an investment and the present discounted value of future benefits. When a business makes a capital investment, it must assess the present costs against the future financial benefits, which are discounted back to their present value using a discount rate.
This concept also applies to government projects or environmental policies, where immediate expenditures are evaluated against the future benefits that may be realized over time .
For instance, applying present discounted value methodologies to a bond involves forecasting the expected cash flows from the bond and then discounting them back to their present value to determine what an investor should pay for the bond now.