What is the difference between independent and mutually exclusive projects? Independent projects: if the cash flows of one are unaffected by the acceptance of the other. Mutually exclusive projects: if the cash flows of one can be adversely impacted by the acceptance of the other.

What is the difference between mutually exclusive project and independent project?

Projects are independent if the cash flows of one are not affected by the acceptance of the other. Conversely, two projects are mutually exclusive if acceptance of one impacts adversely the cash flows of the other; that is, at most one of two or more such projects may be accepted.

What is mutually exclusive projects?

Mutually Exclusive Projects is the term which is used generally in the capital budgeting process where the companies choose a single project on the basis of certain parameters out of the set of the projects where acceptance of one project will lead to rejection of the other projects.

What is the difference between mutually exclusive project and independent project How do the Accept Reject criteria differ if the above projects are mutually exclusive?

The acceptance rule for independent projects is to accept all projects where the IRR is above the required return (hurdle rate) for those projects. If projects are mutually exclusive, accept the one with the highest IRR (assuming it is above the hurdle rate).

What does it mean if projects are independent?

Independent project. A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.

What is the difference between mutually exclusive and not mutually exclusive?

Mutually exclusive events are events that can not happen at the same time. … Non-mutually exclusive events are events that can happen at the same time.

What is the difference between independent and mutually?

Two events are said to be mutually exclusive, when their occurrence is not simultaneous. Two events are said to be independent, when the occurrence of one event cannot control the occurrence of other. Occurrence of one event will result in the non-occurrence of the other.

How do you compare mutually exclusive projects?

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.

What is the difference between independent and mutually exclusive projects how are the method of making a decision affected by each?

Unlike independent projects, in which a decision to invest in one project has no bearing on the decision to make investment in another, investment decision in case of mutually exclusive projects is dependent on the relative merit of the projects.

What do mean by independent and mutually exclusive projects in capital budgeting in what type of decision can there be a conflict between NPV and IRR?

Cause of NPV and IRR conflict Independent projects are projects in which decision about acceptance of one project does not affect decision regarding others. … However, in case of mutually-exclusive projects, an NPV and IRR conflict may arise in which one project has a higher NPV but the other has higher IRR.

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What does mutually independent mean?

A finite set of events is mutually independent if every event is independent of any intersection of the other events.

Are mutually exclusive events dependent or independent?

No, mutually exclusive events (with non-zero probability) are always dependent. The definition of independence for events A and B is that P(A and B) = P(A)P(B).

Can two events be independent and mutually exclusive?

Originally Answered: Can 2 events be mutually exclusive and independent? Not unless one of them has probability zero. Therefore P(A) = 0 or P(B) = 0. If at least one of the events has zero probability, then the two events can be mutually exclusive and indepenent simultaneously.

What are independent and mutually exclusive projects in capital budgeting?

An Independent Project is a project whose cash flows are not affected by the accept/reject decision for other projects. Thus, all Independent Projects which meet the Capital Budgeting criterion should be accepted. Mutually Exclusive Projects are a set of projects from which at most one will be accepted.

What is the difference between mutually exclusive and inclusive events?

2 events are mutually exclusive when they cannot both occur simultaneously. 2 events are mutually inclusive when they can both occur simultaneously.

What is the difference between mutually exclusive and exhaustive events explain with example?

Two events are mutually exclusive if they cannot both be true. … A set of events is collectively exhaustive where at least one of the events must occur. For example, when rolling a six-sided die, the outcomes 1, 2, 3, 4, 5, and 6 are collectively exhaustive, because they encompass the entire range of possible outcomes.

What is the difference between mutually exclusive and complementary events?

Complementary events are mutually exclusive, but when combined make the entire sample space. … Furthermore, complementary events are all inclusive, so they make the sample space when combined, so their probabilities have a sum of 1. The sum of the probabilities of complementary events is 1.

What is the difference between independent and dependent events?

Dependent events influence the probability of other events – or their probability of occurring is affected by other events. Independent events do not affect one another and do not increase or decrease the probability of another event happening.

What is the difference between independent and disjoint events?

Events are considered disjoint if they never occur at the same time; these are also known as mutually exclusive events. Events are considered independent if they are unrelated.

When choosing among mutually exclusive projects What is the project?

If projects are mutually exclusive, the decision rule is to accept the project with the shortest payback period only when the payback period is less than or equal to the maximum payback period. 4.

Is IRR an acceptable method to compare two mutually exclusive projects?

For independent projects, if the IRR is greater than the cost of capital, then you accept as many projects as your budget allows. For mutually exclusive projects, if the IRR is greater than the cost of capital, you accept the project. If it is less than the cost of capital, then you reject the project.

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects one would choose quizlet?

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects, one would choose: the project that pays back the soonest if it is equal to or less than managers’ maximum payback period.

How is net present value used to compare projects?

NPV accounts for the time value of money and can be used to compare similar investment alternatives. 1 The NPV relies on a discount rate that may be derived from the cost of the capital required to invest, and any project or investment with a negative NPV should be avoided.

Why do IRR and NPV disagree?

For single and independent projects with conventional cash flows, there is no conflict between NPV and IRR decision rules. However, for mutually exclusive projects the two criteria may give conflicting results. The reason for conflict is due to differences in cash flow patterns and differences in project scale.

What is meaning of mutually exclusive?

adjective. Essential Meaning of mutually exclusive. : related in such a way that each thing makes the other thing impossible : not able to be true at the same time or to exist together War and peace are mutually exclusive.

Why do IRR and NPV differ?

The NPV method results in a dollar value that a project will produce, while IRR generates the percentage return that the project is expected to create. Purpose. The NPV method focuses on project surpluses, while IRR is focused on the breakeven cash flow level of a project.

What is the difference between pairwise independent and mutually independent?

Mutually independent events are events where each event is independent from any collection of the other events. For example, If you toss a bunch of coins, the result of each one is independent from all the others. Pairwise independent events are groups of events where each pair of events is independent.

How do you know if an event is mutually exclusive?

Two events are mutually exclusive if they cannot occur at the same time. Another word that means mutually exclusive is disjoint. If two events are disjoint, then the probability of them both occurring at the same time is 0.

How do you prove mutually exclusive?

  1. P(G|H) = P(G)
  2. P(H|G) = P(H)
  3. P(G AND H) = P(G)P(H)

When A and B are two non empty and mutually exclusive events then?

Let A and B be two non-empty events (if one of the events is empty, then it has zero probability of occurring, so this is not very interesting). If A and B are mutually exclusive, then P(A ⋂ B) = P(φ) = 0.

What is the opposite of mutually exclusive?

The opposite of mutually exclusive is mutually inclusive. That means, two events should happen at the same time and that they cannot be independent of one another.