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:

Bolles

Robert C. Bolles was a psychologist known for his work on learning, avoidance behavior, and the theory of species-specific defense reactions (SSDRs).

Behavior Systems Approach

An approach in psychology that studies behavior as part of a functional system, including its adaptive purposes and evolutionary history.

Instinctive Behavior System

Innate, fixed patterns of behavior in animals that are typically automatic in response to specific stimuli.

Specific Function

Branches from the mathematical definition to specify a distinct purpose or role that a particular process, action, or object serves within a broader system.