Question

If a firm can earn a profit stream of $50,000 per year for 10 years, that profit stream is worth:1)A)nothing todayB)less than $500,000 today, but a positive amount.C)$500,000 today.D)more than $500,000 today.E)some amount, but whether it is more, less or the same as $500,000 cannot be determined.

Answer 1

B. Less than $500,000 today, but a positive amount

Step-by-step explanation:

Typically considering the time value of money, current income has a smaller value when compared with income in the future.

Which shows that due to the discounting carried out to preserve the current value, the total amount of profit will definitely be less than $500,000