If we discount the annual payments from winning the lottery at 10%,the corresponding present value is greater than if we discount the annual payments at 12%.

Question

Quizplus · Accepted Answer

When we discount cash flows at a higher discount rate, the present value will be lower. Therefore, if the present value of the lottery winnings is higher when discounted at a 10% rate than at a 12% rate, it means that the cash flows are more valuable at the lower rate of discount. Thus, the statement is true.

If We Discount the Annual Payments from Winning the Lottery