Which of the Following Statements Is CORRECT

question 41

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.

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Definitions:

Social Norms

Expected standards of conduct within a society that guide the behavior of its members.

Internalize

The process of incorporating the values, attitudes, and norms of a society into one's own belief system.

Conformity

The act of matching attitudes, beliefs, and behaviors to what is considered normal or acceptable in society.

Financial Success

The achievement of financial goals and stability, often measured by wealth, income, and ability to meet personal and family needs.