Compound interest used in discounted cash flow calculations assumes that companies will reinvest future cash flows when they are received.

Question

Quizplus · Accepted Answer

Compound interest assumes that the cash flows received in the future will be reinvested, thus increasing the value of the investment over time. This is the principle behind discounted cash flow calculations, which consider the time value of money and the potential returns generated by reinvesting future cash flows.

Compound Interest Used in Discounted Cash Flow Calculations Assumes That