In the Case of Mutually Exclusive Projects

question 12

Multiple Choice

In the case of mutually exclusive projects:

• A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other.
• B) they are to be evaluated based on their expected effect on shareholder wealth; the project that enhances shareholder wealth the most should be included in the firm's capital budget.
• C) the financial manager is responsible for choosing the top three of these alternatives since only three can be chosen.
• D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget.

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Definitions:

Mutually Exclusive

This term refers to situations where two conditions cannot both be true at the same time. For example, a light switch cannot be both on and off simultaneously.

Consistent Principle

A rule or standard that is applied uniformly and reliably over time or across situations, without contradictions.

Jointly Exhaustive

A set of options or propositions is considered jointly exhaustive when it covers all possible scenarios or outcomes, leaving no possibility unaddressed.

Mutually Exclusive

Describing two or more events or conditions that cannot occur or be true at the same time.