Which of the Following Statements Is CORRECT

question 1

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified.However, the payback method does not.
• D) Identifying an externality can never lead to an increase in the calculated NPV.
• E) 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.

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Definitions:

Dendrite

The branched extensions of a neuron that receive signals from other neurons and transmit them toward the cell body.

Axon

An extended, thin part of a neuron responsible for carrying electrical impulses outward from the neuron's main cell body.

Cell Body

The central part of a neuron containing the nucleus and responsible for maintaining the life of the cell.

Hippocampus

A major component of the human brain involved in memory formation and spatial navigation, located in the medial temporal lobe.