Explain the difference between independent projects and mutually exclusive projects.
Differentiate between independent projects and mutually exclusive projects.
Independent Projects and Mutually Exclusive Projects:
When acceptance or rejection of a project does not affect the cash flows of other projects, it is known as an independent project whereas when acceptance of a project disqualifies all other contesting projects, it is known as a mutually exclusive project.
Basis | Independent Projects | Mutually Exclusive Projects |
Effect on other projects | The acceptance or rejection of independent projects does not affect the acceptance of rejection of other projects. | The acceptance of a mutually exclusive project disqualifies all the other competing projects. |
Number of projects | More than one independent project may be accepted at a given time. | Only one mutually exclusive project can be accepted at a particular time. |
Cash flow | The acceptance of an independent project does not affect the cash flows of the other independent projects. | The acceptance of a mutually exclusive project affects the cash flows of other projects. |
Table (1)
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