Consider cash flows for Projects X and Y such as: Project X Project Y
Year 1 $3000 $ 0
Year 2 $ 0 $3000
A rational person would prefer receiving cash flows sooner because
A) the money can be reinvested.
B) the money is nice to have around.
C) the investor may be tired of a particular investment.
D) the investor is indifferent to either proposal.

Question

Quizplus · Accepted Answer

A rational person would prefer receiving cash flows sooner because they can be reinvested, generating additional returns. The time value of money dictates that money received sooner is worth more than money received later, as it can be put to use immediately. Therefore, receiving cash flows earlier is generally more desirable.

Consider Cash Flows for Projects X and Y Such As