When using the NPV method,the higher the minimum desired rate of return,the ________ the ________ value of each future cash inflow.
A)higher; present
B)lower; present
C)higher; future
D)lower: future

Question

Quizplus · Accepted Answer

The higher the minimum desired rate of return, the lower the present value of each future cash inflow. This is because a higher rate of return means a higher opportunity cost of tying up money in the investment, and thus, the future cash inflows are discounted at a higher rate, resulting in a lower present value.

When Using the NPV Method,the Higher the Minimum Desired Rate