The longer the time horizon of a project,the more important choosing the right discount rate is.

Question

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The discount rate is the rate at which future cash flows are discounted to their present value. The longer the time horizon of a project, the greater the uncertainty surrounding future cash flows, which makes choosing the right discount rate even more critical. A small change in the discount rate can have a significant impact on the present value of future cash flows, especially if the time horizon is long. Therefore, the importance of choosing the right discount rate increases with the length of the time horizon.

The Longer the Time Horizon of a Project,the More Important