Asked by Hanna Watkins on Jul 21, 2024
Verified
The present value of a cash flow will never be greater than the future dollar amount of the cash flow.
Present Value
The present value of a future amount of money or series of cash flows, when calculated with a certain return rate.
Future Dollar Amount
The projected value of a current sum of money at a specified future date, taking into account factors like inflation or investment returns.
- Comprehend the principle of the time value of money and its significance in making financial decisions.
Verified Answer
DH
Daphnee HenryJul 24, 2024
Final Answer :
True
Explanation :
The present value of a cash flow is calculated by discounting the future cash flow to account for the time value of money, which means a dollar today is worth more than a dollar in the future due to its potential earning capacity. Therefore, the present value will always be less than or equal to the future amount, assuming a positive discount rate.
Learning Objectives
- Comprehend the principle of the time value of money and its significance in making financial decisions.