Economics Capital Budgeting Questions
Mutually exclusive projects in capital budgeting refer to projects that cannot be undertaken simultaneously due to limited resources or conflicting objectives. In other words, selecting one project automatically excludes the other. On the other hand, independent projects are those that can be undertaken simultaneously without any conflict or resource constraints. The decision to accept or reject mutually exclusive projects is based on comparing their respective cash flows and evaluating which project provides the highest net present value (NPV) or internal rate of return (IRR). In contrast, independent projects are evaluated individually based on their own cash flows and profitability measures.