The time value of money is accounted for in decision trees using which of the following? EMV calculations Discounted payoffs Required rates of return Sensitivity analysis

The time value of money is accounted for in decision trees primarily through **Discounted payoffs**. Here's a brief explanation of each option: 1. **EMV calculations**: Expected Monetary Value (EMV) is a decision-making tool that calculates the average outcome when the future includes scenarios that may or may not happen. While it considers probabilities, it does not inherently account for the time value of money. 2. **Discounted payoffs**: This method explicitly incorporates the time value of money by discounting future cash flows to their present value. This allows decision-makers to evaluate the worth of future payoffs in today's terms. 3. **Required rates of return**: This concept relates to the minimum return an investor expects to achieve from an investment, which can indirectly consider the time value of money, but it is not a direct method used in decision trees. 4. **Sensitivity analysis**: This technique assesses how sensitive the outcomes of a decision are to changes in input variables. It does not directly account for the time value of money. In summary, the correct answer is **Discounted payoffs**.