Of the following choices regarding the time value of money...

Of the following choices regarding the time value of money, which one is accurate? Increasing the discount rate, increases the PV of a project. Increasing the initial cost of a project increases the project's NPV. Decreasing the discount rate increases the FV. Decreasing the PV decreases the FV. Increasing the FV decreases the PV.

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Transcript

00:01 Hello students, here is a question.

00:02 You have determined the profitability of a plant project by finding the present value of all the cash flow from the project.

00:08 Which of the following would case the project to look more appeal in terms of the present value of those cash flows? so, this is our question.

00:16 Let us discuss the answer further.

00:17 So, here we have an options given in the question.

00:20 The first option says that the discount rate discount rate decreases.

00:26 The discount rate decreases and the second option says that the cash flow are extended over extended over a long period of time, a long period of time, but the total amount of but the total amount of cash flow remains same and option c is the discount rate increases.

01:09 The discount rate increases and option d is answer a and b above are the correct answers are a and b of above.

01:26 So, these are the options we have.

01:28 Let us discuss this.

01:29 So, first we need to understand that the present value of a cash flow is calculated by the discounting future cash flow to their present value using the discount rate.

01:37 So, the higher the discount rate, the lower the present value of a cash flow.

01:41 So, now let us look the options.

01:43 So, option a is the discount rate decreases...

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