Final answer:
'True' Current deductions are worth more than future deductions because of the present discounted value, which accounts for the time value of money. This principle affects various financial decisions, including investments and tax planning.
The correct answer is 1.
Step-by-step explanation:
In cash flow terms, current deductions are generally worth more than future deductions. 'True' . This is because of the concept of present discounted value, which reflects the principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity. This same principle applies to deductions; a deduction today can save you money on taxes now, which you could reinvest to earn more over time, as opposed to saving on taxes in the future.
When making financial decisions, such as those involving tax deductions, investments, or policy considerations, the present discounted value is an indispensable tool. It allows individuals and entities to account for the time value of money, comparing the value of money received today versus the same amount received in the future. For instance, when a government evaluates adding safety features to a highway, it must weigh the immediate costs against the future benefits, which are discounted to their present value to make an accurate comparison.
The importance of the timing of cash flows is fundamental in both personal and business financial contexts, shaping decisions such as investments, tax planning, and assessing the long-term impact of budget deficits and environmental policies.