Question

The present value of future cash flows: a. increases as the discount rate decreases. b. decreases as the discount rate decreases. c. decreases as the number of discounting periods decrease. d. increases as the number of discounting periods increase.

Answer 1

Answer:a

Explanation:

The Present value of cash Flow increases as the discount rate decreases as there is an inverse relation with discount rate.

Mathematically,

$PV=\frac{CF}{\left ( 1+r\right )^t}$

Where

PV=Present value

CF=cash Flow

r=discount rate

t=time

as r decreases PV increases