Projects are mutually exclusive if picking one project eliminates the ability to pick the other project. This mutually exclusive situation can arise for different reasons. Which of the statements below is NOT one of these reasons?

FINANCIAL MANAGEMENT

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	One project will always have a negative NPV.
B	There is a scarce resource that both projects would need.
C	There is need for only one project, and both projects can fulfill that current need.
D	By using funds for one project, there are not enough funds available for the other project.

Explanation:

Detailed explanation-1: -A project is said to be mutually exclusive; that is, a situation in which the acceptance of one project by the firm leads to the automatic rejection of the remaining project. This process is used in capital budgeting and it is based on some parameters on which the firm determines the viability of the project.

Detailed explanation-2: -The simplest way of choosing among mutually exclusive projects with equal lives is to compute the net present values of the projects and choose the one with the highest net present value. This decision rule is consistent with firm value maximization.

Detailed explanation-3: -Mutually exclusive projects: If the NPV of one project is greater than the NPV of the other project, accept the project with the higher NPV. If both projects have a negative NPV, reject both projects.

Detailed explanation-4: -answer: (c) two projects are mutually exclusive if the acceptance of one project has no bearing on the acceptance or rejection of the other project.

There is 1 question to complete.

BUISENESS MANAGEMENT

FINANCIAL MANAGEMENT