💡 C. Discounted cash flow (DCF) considers the time value of money (TVM) by discounting future cash flows to their present value using a discount rate (usually the cost of capital or required rate of return). DCF methods include Net Present Value (NPV) and Internal Rate of Return (IRR), which are widely used in capital budgeting to evaluate investment opportunities. Why the other options are incorrect: A. Annual rate of return ᤶ ᤷ Incorrect – The annual rate of return (or accounting rate of return, ARR) is based on accounting profits rather than cash flows and does not consider the time value of money. It simply calculates the return as a percentage of initial or average investment. D. Cash payback ᤶ ᤷ Incorrect – The payback period method measures how long it takes to recover the initial investment from cash flows. However, it does not discount future cash flows, meaning it ignores the time value of money.