As the present value of future returns decreases with rising discount rates, firms with high hurdle rates favor short-run projects.

Question

Quizplus · Accepted Answer

This statement is true because with a higher discount rate (hurdle rate), the present value of future cash flows decreases. Therefore, firms with high hurdle rates would prefer shorter-term projects that generate returns sooner, rather than longer-term projects that may have higher future returns but lower present values due to the discount rate.

As the Present Value of Future Returns Decreases with Rising