When the Discount Rate Is Decreased

question 51

Multiple Choice

When the discount rate is decreased,

• A)the present value of future cash flows increases.
• B)the present value of future cash flows decreases.
• C)there is no change in the present value.
• D)net present value would equal zero.

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Definitions:

Consolidated Balance Sheet

A financial statement that combines the assets, liabilities, and equity of a parent company with its subsidiaries.

Straight-Line Method

A method of calculating depreciation of an asset by evenly spreading its cost over its useful life.

Intra-entity Gross Profit

Gross profit generated from transactions within the same corporate entity, which may require elimination during consolidation to prevent overstating earnings.

Consolidation Process

This refers to the systematic approach of merging and integrating the financial data of multiple entities within a corporation to produce a unified set of financial statements.