Present value determination is a procedure that
A) accounts for the opportunity cost of money
B) adjusts for changes in the general price level
C) discounts a present value into its future value
D) compares the present value of benefits to the present value of costs

Question

Quizplus · Accepted Answer

Present value determination involves calculating the current value of future cash flows by discounting them back to their present value. This discounting process takes into account the opportunity cost of money (i.e., the fact that money is more valuable today than in the future due to inflation and other factors). Therefore, choice A is the correct answer. Choice B refers to inflation adjustment, which is not directly related to present value determination. Choice C is the opposite of the present value determination process, and choice D is related to cost-benefit analysis, which is a broader concept.

Present Value Determination Is a Procedure That