Which one of the following would make a mutually exclusive project unacceptable?
A) Cash inflow for net working capital at Time 0
B) Requiring fixed assets that would have no salvage value
C) An equivalent annual cost that exceeds that of an alternative project
D) Lack of revenue generation
E) A depreciation tax shield that exceeds the value of the interest expense

Question

Quizplus · Accepted Answer

Mutually exclusive projects are projects that cannot be undertaken together because they serve essentially the same purpose and compete with each other for the same resources. Therefore, choosing one project means rejecting the other. In this case, if the equivalent annual cost of one project exceeds that of an alternative project, it would be unacceptable because it would result in a lower return on investment compared to the other project. Choices A, B, D, and E are not sufficient reasons to reject a project on the basis of mutual exclusivity.

Which One of the Following Would Make a Mutually Exclusive