As the Discount Rate Increases Without Limit,the Present Value of the Future

question 59

Multiple Choice

As the discount rate increases without limit,the present value of the future cash inflows:

• A) Gets larger without limit.
• B) Stays unchanged.
• C) Approaches zero.
• D) Gets smaller without limit, i.e. approaches minus infinity.

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Definitions:

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.

Sole Proprietorship

A business owned and operated by a single individual, with no legal distinction between the owner and the business entity.

Drawing Account

An account used by sole proprietors or partners to record the money withdrawn from the business for personal use.

Capital Account

Refers to a financial statement that shows the changes in a company's equity during a specific period due to transactions with its owners, such as stock issuance and dividend payments.