Which of the Following Statements Is CORRECT

question 14

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 increase.
• 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:

Cough Reflex

A protective reflex that helps clear the airways of mucus, irritants, and pathogens through a sudden, often repetitive, expulsion of air from the lungs.

Peripheral Nervous Systems

The portion of the nervous system that consists of nerves and ganglia outside of the brain and spinal cord, facilitating communication to the central nervous system.

Sedative/Tranquilizer

These are drugs or agents that induce a calming effect, reducing excitement, irritability, or anxiety, and often used to facilitate sleep.

Brain Receptors

proteins on the surface of neurons in the brain that receive and respond to chemical signals.