The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that

Question

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The discount factor represents the present value of future cash flows, and it decreases over time because of the time value of money. A dollar received in three years is worth less than a dollar received in two years because of the opportunity cost of waiting for an extra year to receive the money. Therefore, the discount factor in Year 3 would be smaller than in Year 2.

The Reason That a Discount Factor in Year 3 Is