The effect of purchasing power or inflation on present value is important because _________?
AIt increases the real value of cash flows received in the future
BIt has no effect on real value of cash flow received in the future
CIt reduces the real value of cash flows received in the future
DNone of these
Correct answer
C. It reduces the real value of cash flows received in the future
Explanation
It reduces the real value of cash flows received in the future is the correct answer. Review the question and compare it with the other choices to remember this fact for future exams.