Suppose a Firm's CFO Thinks That an Externality Is Present

question 52

True/False

Suppose a firm's CFO thinks that an externality is present in a project, but that it cannot be quantified with any precision⎯estimates of its effect would really just be guesses.In this case, the externality should be ignored⎯i.e., not considered at all⎯because if it were considered it would make the analysis appear more precise than it really is.

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Definitions:

Accrued Salaries

Salaries that have been earned by employees but have not yet been paid by the end of an accounting period.

Insurance Expense

The cost incurred by a business or individual for purchasing insurance coverage, recognized as an expense over the policy period.