As the discount rate becomes higher and higher, the present value of inflows approaches
A) 0
B) minus infinity
C) plus infinity
D) need more information

Question

Quizplus · Accepted Answer

As the discount rate becomes higher and higher, the present value of future cash inflows decreases, approaching zero. This is because the discount rate represents the time value of money and the higher the discount rate, the less value is placed on future cash inflows. Therefore, the present value of inflows approaches zero, not infinity or negative infinity.

As the Discount Rate Becomes Higher and Higher, the Present