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:

Division

A distinct part of a larger company or organization that focuses on a specific area of business or operation.

Profit Centers

Divisions or departments within an organization that are directly responsible for generating its income.

Information

Data that has been processed or structured in a meaningful way to be useful for decision-making or analysis.

Profit Center

A division whose parent company evaluates it on the basis of the profit it earns.