The less certain a cash flow, the__________the risk, and the__________the value of the cash flow.

Question

Quizplus · Accepted Answer

The less certain a cash flow, the higher the discount rate used to calculate its present value. This is because there is more risk associated with uncertain cash flows, and investors require a higher return to compensate for that risk. A higher discount rate leads to a lower present value of the cash flow. Therefore, the answer is D, higher discount rate and lower present value.

The Less Certain a Cash Flow, The__________the Risk, and The__________the

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