Tomʹs Donuts can invest in a new espresso machine that costs $500 and will yield expected profits of $350 each year for two years. At higher interest rates, the present discounted value of profits from the investment

Question

Quizplus · Accepted Answer

At higher interest rates, the present discounted value of profits decreases because the future profits are discounted back to their present value at a higher rate, making them worth less in today's dollars.

Tomʹs Donuts Can Invest in a New Espresso Machine That