The NPV Method Is Most Likely to Be Used In

question 73

Multiple Choice

The NPV method is most likely to be used in:

• A) large firms.
• B) publicly traded firms.
• C) firms run by CFOs with MBAs.
• D) all of the above.

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Definitions:

Economic Efficiency

A situation where all resources are allocated in a way that maximizes the total benefit to society or minimizes waste.

External Cost

A cost that a transaction or activity imposes on a party who is not involved in the transaction, often not reflected in market prices.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often associated with environmental, health, and safety concerns of public and private actions.

Positive Externality

A benefit that is enjoyed by a third-party as a result of an economic transaction.