Question 44 6 points Saved Which of the following statements is CORRECT? 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 a. favorable effect on other operations, then this is not an externality. Ob. A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm's existing stores. If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land which C. lowers the NPV. When estimating the project's operating cash flows, it is important to include both opportunity costs and sunk costs, but the firm should ignore the cash flow d. effects of externalities since they are accounted for in the discounting process