Which of the statements below is correct about an increase in the discount rate?
A) Will increase the present value of future cash flows.
B) Will have no effect on net present value.
C) Will reduce the present value of future cash flows.
D) Is one method of compensating for reduced risk.

Question

Quizplus · Accepted Answer

An increase in the discount rate will reduce the present value of future cash flows. This is because a higher discount rate means that future cash flows are worth less in today's money.

Which of the Statements Below Is Correct About an Increase