All 34 Capital Budgeting questions
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What is the difference between capital and revenue expenditure in budgeting? Why is the initial investment treated as a time-zero cash outflow? What are the advantages and disadvantages of the payback method? What is a hurdle rate? What is the difference between a screening and a preference decision? What is the time value of money and why does it matter in capital budgeting? What is Net Present Value (NPV) and how do you interpret it? What is the Internal Rate of Return (IRR)? What is the discounted payback period? What cash flows are relevant in capital budgeting?
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Budgeting & Forecasting › Capital Budgeting

What is the difference between mutually exclusive and independent projects?

Beginner

Answer

Independent projects can all be accepted if they meet the criteria (accepting one doesn't affect another). Mutually exclusive projects compete—accepting one means rejecting the others (e.g., two machines for the same job)—so they must be ranked, and NPV is the preferred ranking criterion.
Real-world example Choosing between two machines is mutually exclusive; funding several unrelated projects is independent.

Common follow-ups: Which requires ranking? | Which criterion ranks best?

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All 34 Capital Budgeting questions