When the discount rate:
A) increases, the present value of a future cash flow decreases.
B) increases, the present value of a future cash flow increases.
C) decreases, the present value of a future cash flow will remain the same.
D) decreases, the present value of a future cash flow decreases.

Question

Quizplus · Accepted Answer

When the discount rate increases, it means that the required rate of return on an investment is also increasing. This leads to a decrease in the present value of a future cash flow because the higher discount rate makes the future cash flow less valuable in today's dollars.

When the Discount Rate