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Question $49$

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Which of the following statements is CORRECT?

Question $49$Select one:

a$.$

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$.$

b$.$

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.

c$.$

Identifying an externality can never lead to an increase in the calculated NPV$.$

d$.$

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.

e$.$

Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does not.