Using higher discount rates will:
A) not affect the present value of the future cash flow.
B) increase the present value of any future cash flow.
C) decrease the present value of any future cash flow.
D) None of the above.

Question

Quizplus · Accepted Answer

Using higher discount rates will decrease the present value of any future cash flow. This is because a higher discount rate indicates that the investor requires a greater return to compensate for the risks involved in the investment, thus reducing the amount of money they are willing to pay for the future cash flow.

Using Higher Discount Rates Will