Mutually exclusive projects are capital projects which compete directly with each other. For example, if a manager has a choice to make between undertaking projects X and Y, and must choose either of the two and not both, then projects X and Y are said to be mutually exclusive.

At which point is the net present value profiles of two mutually exclusive projects with normal cash flows are most likely to intersect the horizontal axis?

Given two mutually exclusive projects with normal cash flows, the point at which their net present value profiles intersect the horizontal axis is most likely the projects’: weighted average cost of capital.

Which of the following statements best explains what it means when a project has an NPV of $0 quizlet?

Which of the following statements best explains what it means when a project has an NPV of $0? It’s OK to accept the project, as long as the project’s profit is positive. b) When a project has an NPV of $0, the project is earning a rate of return equal to the project’s weighted average cost of capital.

Which method provides correct ranking of mutually exclusive projects?

For example, a project might have a higher positive NPV due to a larger initial investment but a lower PI than another mutually exclusive project with a smaller initial investment. The absolute measure gives the correct rankings of mutually exclusive investment projects that will maximize the value of the firm.

What is the IRR of the project?

The internal rate of return rule is a guideline for evaluating whether to proceed with a project or investment. The IRR rule states that if the IRR on a project or investment is greater than the minimum RRR—typically the cost of capital, then the project or investment can be pursued.

What does it means when a project has a NPV of $0?

When a project has an NPV of $0, the project is earning a rate of return less than the project’s weighted average cost of capital. It’s Ok to accept the project, as long as the project’s profit is positive.

How are cash flows affected in mutually exclusive projects?

In mutually exclusive projects, cash flows of one project can be adversely affected by the acceptance of the other project. In mutually exclusive projects, all projects are to accomplish the same task.

What makes a project a mutually exclusive project?

A set of projects from which at most one will be accepted is termed as Mutually Exclusive Projects. In mutually exclusive projects, cash flows of one project can be adversely affected by the acceptance of the other project. In mutually exclusive projects, all projects are to accomplish the same task.

When to use net present value for mutually exclusive projects?

If conflicts arise while making decision regarding mutually exclusive projects, the Net Present Value method should be given priority due to its more conservative or realistic reinvestment rate assumption.

Which is the opposite of a mutually exclusive event?

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. What is an example of mutually exclusive? Mutually Exclusive: can’t happen at the same time.