Projects are mutually exclusive if picking one project eliminates the ability to

Question

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?

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.

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 / Answer

Projects can be mutually exclusive when two projects can fulfill the need but one project is required, when the resource required is common and scarce and when fund availability is a constratint.

But when one project will always have a negative NPV , then it is not subject to situation of mutual exclusiveness as one project gets automatically excluded due to negative NPV .

So answer is A. One project will always have a negative NPV.

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