Comparing current returns with future returns, without accounting for the time value of money, will overstate the relative value of the future returns.

Question

Quizplus · Accepted Answer

Not accounting for the time value of money means ignoring the principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity. This oversight will indeed overstate the value of future returns compared to current returns.

Comparing Current Returns with Future Returns, Without Accounting for the Time