Understanding that money grows over time explains why you need to:

• A. Record all cash flows at their nominal value regardless of timing.
• B. Assume that the value of money remains constant over time.
• C. Discount future cash flows to their present value when making investment decisions.
• D. Ignore the interest rate when evaluating long-term projects.

Answer: (C)

Verified step by step guidance

1. Understand the concept of the time value of money, which states that a dollar today is worth more than a dollar in the future due to its earning potential.
2. Learn that discounting future cash flows to their present value is a method used to account for the time value of money in investment decisions.
3. Identify the formula for present value (PV), which is: $\mathrm{PV}=\frac{\mathrm{FV}}{{(}^1}$, where FV is future value, r is the discount rate, and n is the number of periods.
4. Recognize that discounting future cash flows helps compare the value of cash flows occurring at different times, enabling better investment decision-making.
5. Understand that ignoring the interest rate or failing to discount future cash flows can lead to inaccurate evaluations of long-term projects.