Which of the Following Statements Is Correct

question 46

Multiple Choice

Which of the following statements is correct?

• A)If a project can create employment in a slump area, the firm should include such an externality in the NPV calculations.
• B)If cannibalization exists, then the cash flows associated with the project must be increased to offset these effects. Otherwise, the calculated NPV will be biased downward.
• C)If cannibalization is determined to exist, then this means that the calculated NPV considering cannibalization will be higher than the NPV that does not recognize these effects.
• D)Cannibalization is a type of externality that is not against the law, and any harm it causes is done to the firm itself.

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Definitions:

Feeder Funds

Investment funds that aggregate capital commitments from investors into a master fund for investing in specific assets.

Hedge Funds

Investment funds that employ different strategies to earn active return, or alpha, for their investors, often including leverage, short-selling, and derivatives.

Managed Futures

Investment strategies that involve the use of futures contracts as part of a broader investment strategy managed by professional investment managers.

Market-neutral Hedge Funds

Investment funds that seek to generate returns by exploiting price differences between related assets while maintaining a neutral exposure to market movements.