Question

When the mutually exclusive alternatives under consideration have only disbursements (service alternatives), the do-nothing alternative must...

When the mutually exclusive alternatives under consideration have only disbursements (service alternatives), the do-nothing alternative must be included so that a rate of return analysis can be conducted on the incremental cash flow.

Question 1 options:

True
False
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Answer #1

False

Explanation : Alternatives are said to be mutually exclusive only when, more than one alternative is able to be selected from the available alternatives. The do-nothing alternatives are being compared by each alternative when evaluating. So this statement is false. Incremental analysis is an economic analysis which is the difference between two alternatives. Do-nothing alternative is only capable of working successfully when revenue alternatives are included.

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