You plan to analyze the value of a potential investment by calculating the sum o

Question

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

The riskiness of the investment's cash flows increases.

the discount rate decreases

The total cash flow stays the same, but more of the cash flows are received in the later years and less in the earlier years.

The discount rate increases.

The riskiness of the investment's cash flows increases.

the discount rate decreases

The total cash flow stays the same, but more of the cash flows are received in the later years and less in the earlier years.

The discount rate increases.

Explanation / Answer

Option A C & D would lower the present value but if only one option is to be selected it will be Option C

Option B would not lower the present value

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