Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A) In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to a downward bias in the NPV.
• B) The existence of any type of "externality" will reduce the calculated NPV versus the NPV that would exist without the externality.
• C) If one of the assets to be used by a potential project is already owned by the firm, and if that asset could be sold or leased to another firm if the new project were not undertaken, then the net after-tax proceeds that could be obtained should be charged as a cost to the project under consideration.
• D) If one of the assets to be used by a potential project is already owned by the firm but is not being used, then any costs associated with that asset is a sunk cost and should be ignored.
• E) In a capital budgeting analysis where part of the funds used to finance the project would be raised as debt, failure to include interest expense as a cost when determining the project's cash flows will lead to an upward bias in the NPV.

---

Definitions:

Machiavelli's Political Theories

The ideas and concepts on governance and political strategy articulated by Niccolò Machiavelli, most notably in his work "The Prince," which emphasizes practicality over morality in statecraft.

Commercial Power

The capacity of a nation, organization, or group to influence others through the control of trade and economic resources.

Ottoman Empire

A historical Islamic empire founded by Osman I in approximately 1299, which at its height covered Southeast Europe, Western Asia, and North Africa.

The Prince

A political treatise by Niccolò Machiavelli, written in 1513, advising rulers on how to gain and maintain power by pragmatic and sometimes manipulative means.