With increase in the discounted cash flow rate of return, the ratio of the total present value to the initial investment of a given project ?
Correct answer: A. Decreases
- A. Decreases
- B. Increases
- C. Increases linearly
- D. Remain constant
Explanation
Increasing the discount rate reduces the present value of every future cash flow, while the initial investment remains unchanged. Thus, the ratio of total present value to initial investment decreases.
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