Which of the following statements about discounting future cash flows is true?

Discounting future cash flows is an essential concept in real estate finance that helps determine the present value of expected future income from a property. The statement that it projects cash flows for a standard holding period is true because discounting future cash flows requires estimating the income that a property will generate over a specific time frame, commonly known as the holding period. Investors and analysts need to establish a timeframe to evaluate the feasibility of an investment, project potential cash flows for this period, and then discount them back to present value to make informed financial decisions.

The process involves assessing expected rental income, operating expenses, and other factors that could influence net cash flow during the holding period. By focusing on this timeframe, investors can better understand how the value of those cash flows decreases over time due to the time value of money. Thus, projecting cash flows for a standard holding period is a fundamental aspect of discounting future cash flows in real estate analysis.