What metric is used to determine the present value of future cash flows?Select an answer:discount rateWACCpayback periodCAGR

Analysis of Options

1. Discount Rate: This is the primary metric used to calculate the present value of future cash flows. It reflects the time value of money, adjusting for the risk and opportunity cost associated with the investment.

2. WACC (Weighted Average Cost of Capital): This represents the average rate that a company is expected to pay to finance its assets, typically used in conjunction with the discount rate for calculating present value.

3. Payback Period: This metric measures the time it takes for an investment to repay its initial cost, but it does not take the time value of money into account.

4. CAGR (Compound Annual Growth Rate): This is used to measure the mean annual growth rate of an investment over a specified time period, not specifically related to present value calculations.

Conclusion

Out of the given options, the discount rate is the most appropriate metric used to determine the present value of future cash flows.

Final Answer

Discount rate