Which of the following statements about the time value of money concept is true?
A) It means a dollar received today is worth less than a dollar received tomorrow.
B) It assumes that inflation rate remains constant for the foreseeable future.
C) It refers to the fact that higher cash flows in earlier years are less desirable.
D) It assumes that people prefer to consume things at some time in the future rather than today.

Question

Quizplus · Accepted Answer

The time value of money concept implies that a dollar received today is worth more than a dollar received tomorrow due to the opportunity cost of not having the use of that dollar today. Factors such as inflation and interest rates affect the value of money over time.

Answer: D
 The time value of money concept is based on the idea that individuals prefer to consume goods and services in the future rather than today, given the option. This is because of the opportunity cost of using money today, which could be invested or earn interest.

Which of the Following Statements About the Time Value of Money