As the discount rate becomes higher and higher, the present value of inflows approaches
B. minus infinity.
C. plus infinity.
D. More information is needed.
Answer Explanation for Question: As the discount rate becomes higher and higher, the present value of inflows approaches
A present value (PV) is the value of a future amount of money or stream of cash flows given a specified return rate. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.
In other words, when an identical amount of money is received in the future, it will not be as valuable as when it is received in the present. This is the concept of the present value.