Which of the following is used to compute the present value of future cash flows when evaluating investments involving cash flows over time where time elapses between cash payment and receipt?

Question

Quizplus · Accepted Answer

The firm's cost of capital is used to compute the present value of future cash flows when evaluating investments involving cash flows over time where time elapses between cash payment and receipt. This is because the cost of capital represents the minimum rate of return that investors require for investing in a project, and serves as a discount rate to bring future cash flows back to their present value. A and D are incorrect because they are short-term rates and may not be representative of the cost of capital. B is also incorrect as it is a general benchmark interest rate that does not account for the specific risks and costs associated with a particular investment.

Which of the Following Is Used to Compute the Present