Asked by Divya Patel on May 25, 2024
Verified
The present value of a given future cash flow will decrease as the discount rate decreases.
Discount Rate
The interest rate used to discount future cash flows to their present value, reflecting the time value of money and risk of the cash flows.
Future Cash Flow
Projected cash receipts and disbursements over a future period, indicating the amount of money expected to flow in and out of the business.
Present Value
The contemporary valuation of a future money sum or ongoing cash flows, factoring in a defined interest rate.
- Show comprehension of the impact that alterations in the discount rate have on the present value of cash flows.
Verified Answer
BC
Brynn ChaseMay 31, 2024
Final Answer :
False
Explanation :
The present value of a given future cash flow increases as the discount rate decreases, because a lower discount rate means future cash flows are discounted less, making their present value higher.
Learning Objectives
- Show comprehension of the impact that alterations in the discount rate have on the present value of cash flows.