If an investment has cash outflows of Q dollars at the end of each year for three years,then the present value of these cash outflows under a 10% rate of return will be:
A)greater than under a 12% rate of return.
B)less than under a 12% rate of return.
C)equal to that under a 12% rate of return.
D)unknown because it depends on the size of Q.

Question

Quizplus · Accepted Answer

The present value of cash outflows is greater under a lower discount rate (10%) compared to a higher discount rate (12%) because the cash flows are discounted less, resulting in a higher present value.

If an Investment Has Cash Outflows of Q Dollars at the End