The net present value of future cash inflows received in earlier years is higher than future cash inflows received in later years.

Question

Quizplus · Accepted Answer

This is true because the net present value (NPV) calculation discounts the value of future cash inflows to reflect the time value of money. The longer the time horizon for the cash inflows, the more they are discounted, resulting in a lower NPV. Therefore, cash inflows received earlier in time have a higher present value and contribute more to the NPV calculation.

The Net Present Value of Future Cash Inflows Received in Earlier