Final answer:
The statement that determining fair value by calculating the present value of future cash flows is a level 1 type of input is false.
Step-by-step explanation:
Determining fair value through present value calculations is falsely attributed as a Level 1 input; it is actually considered a Level 2 or Level 3 input because it involves judgments or unobservable inputs. In the hierarchy of fair value measurements, Level 1 inputs are based on quoted prices for identical assets or liabilities in active markets, which are readily and regularly available. Calculating the present value of future cash flows involves using assumptions and is considered either a Level 2 or Level 3 input depending on the observability of the inputs used.
Present value is a concept used in finance to determine the current worth of a future stream of cash flows by applying a specific discount rate, which reflects both the time value of money and the risk or uncertainty of those cash flows. When doing a present value calculation for investments like bonds or stocks, considerations such as interest rates, capital gains, and dividend yields must be taken into account. It is an analytical tool crucial for making business and government investment decisions as well as evaluating environmental policies and financial securities.