Discounting Is the Process of Computing the Present Value of Sums

question 19

True/False

Discounting is the process of computing the present value of sums of money to be received in the future.

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Definitions:

Discount Rate

The discount rate is the interest rate used in discounted cash flow analysis to determine the present value of future cash flows, reflecting the time value of money and risk.

Net Present Value

A financial metric that calculates the difference between the present value of cash inflows and outflows over a period, used in capital budgeting to assess the profitability of an investment.

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Net Present Value

A financial metric used to evaluate the profitability of an investment or project, calculated by summing all expected future cash flows, discounted back to their present value.