Which of the Following Statements Is CORRECT

question 14

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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 increase.
• C) 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.
• D) Both the NPV and IRR methods deal correctly with externalities,even if the externalities are not specifically identified.However,the payback method does not.
• E) Identifying an externality can never lead to an increase in the calculated NPV.

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Definitions:

Nature of Benefits

The inherent advantages or positive outcomes that come from certain actions, policies, or products.

Family-friendly Benefits

Workplace policies that accommodate employees' needs for child care, parental leave, and other family-related matters.

HMOs

Health Maintenance Organizations, a type of health insurance plan that provides healthcare services to members through a network of doctors, hospitals, and other healthcare providers.

PPOs

Preferred Provider Organizations, a type of health insurance plan that offers a network of healthcare providers you can use for your medical care.