Which of the Following Activities, If Any, Represents an External

question 236

Multiple Choice

Which of the following activities, if any, represents an external benefit?

• A)​The benefit to a consumer from watching a film on DVD.
• B)​The reduction in air quality resulting from industrial development in an urban area.
• C)​The increase in the value of property belonging to your neighbors when you hire a landscaper to beautify your front yard.
• D)​The reduction in property values when a new airport is built in a neighborhood.

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Definitions:

Forecasted Cash Flows

Projections of how much cash a company will generate and use over a certain period, used for planning and investment assessment.

Capital Budgeting Investment Rule

Guidelines or criteria used by businesses to evaluate and select among potential investments or projects based on their expected returns or value.

Increase in Cost

A financial term indicating a rise in expenses or prices, affecting the overall cost structure of a business or the price level in an economy.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project zero, used to assess the profitability of potential investments.