Which of the Following Statements Is CORRECT

question 25

Multiple Choice

Which of the following statements is CORRECT?

• A) An externality is a situation where a project would have an adverse effect on some other part of the firm's overall operations.If the project would have a favorable effect on other operations,then this is not an externality.
• B) An example of an externality is a situation where a bank opens a new office,and that new office causes deposits in the bank's other offices to decline.
• C) The NPV method automatically deals correctly with externalities,even if the externalities are not specifically identified,but the IRR method does not.This is another reason to favor the NPV.
• D) Both the NPV and IRR methods deal correctly with externalities,even if the externalities are not specifically identified.However,the payback method does not.
• E) Identifying an externality can never lead to an increase in the calculated NPV.

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Definitions:

Stirrup

A small bone in the ear that helps transmit sound vibrations to the inner ear; also known as the stapes.

Oval Window

A membrane-covered opening that leads from the middle ear to the cochlea in the inner ear, transmitting sound vibrations to the inner ear.

Nociceptors

Sensory receptors found in skin, muscles, and organs that detect harmful stimuli or signals for potential damage, leading to the perception of pain.

Phantom Limb Pain

Perception of pain apparently “in” limbs that have been amputated, often because of activation of nerves in the stump of the missing limb.