PRC-2 · Chapter 6 · Question 19 of 45
In the standard Net Present Value formula, what represents the mathematical factor used to convert future cash flows into today's monetary equivalent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The discount factor (1 + i)^-n
Explanation
The discount factor, formulated as (1 + i)^-n or 1/(1 + i)^n, is the multiplier applied to future cash flows to strip away the time value of money, revealing their present value.
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