Question

B333 poinds Which of the following statements is CORRECT? O Both the NPV and IRR methods deal aomedtly with extemalities even the etemalites are nat speafically idensified. However the payback method does not O Mentifying an extemality can never lead to an inaease in he calaulated NP not an exfemally O An extemality is a situation where a projedt would have an advene effect on some other part of the fm's overall operations If the projet would have a favoratie affed cn oher operatians then ihis O An example of an extenality is a situation where a bank opens a new office, and that new office es deposits in the ban's ather offces to dedine O The NPV method automatically deals condtly with exdemalities even if the eaternalities are not specficaly identited, but the IRR method dos not Ths is andter rean to fevor the NPV

Answer 1

The correct answer is;-

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