If the present value of a perpetual income stream is increasing, the discount rate must be
A) changing unpredictably.
B) decreasing.
C) increasing.
D) increasing proportionally.

Question

Quizplus · Accepted Answer

If the present value of a perpetual income stream is increasing, it means that the value of future cash flows is worth more in today's dollars. This can only happen if the discount rate used to calculate the present value is decreasing, making the present value higher.

If the Present Value of a Perpetual Income Stream Is