Which of the following statements is CORRECT?

If cannibalization exists, then the cash flows associated with the project

must be increased to offset these effects. Otherwise, the calculated NPV

will be biased downward.

If a firm is found guilty of cannibalization in a court of law, then it is

judged to have taken unfair advantage of its customers. Thus,

cannibalization is dealt with by society through the antitrust laws.

If cannibalization is determined to exist, then this means that the calculated

NPV if cannibalization is considered will be higher than the NPV if this

effect is not recognized.

If a firm is found guilty of cannibalization in a court of law, then it is

judged to have taken unfair advantage of its competitors. Thus,

cannibalization is dealt with by society through the antitrust laws.

Cannibalization, as described in the text, is a type of externality that is not

against the law, and any harm it causes is done to the firm itself.