You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would increase the present value of your cash flows?
A)Assume a longer stream of cash flows of the same amount
B)Increase the discount rate
C)Decrease the discount rate
D)a and c

Question

Quizplus · Accepted Answer

Assuming a longer stream of cash flows of the same amount (A) would increase the present value because you're adding more cash flows to be discounted back to the present. Decreasing the discount rate (C) increases the present value because it reduces the rate at which future cash flows are discounted, making them more valuable in today's terms.

You Have Just Calculated the Present Value of the Expected