Question

4. What does it mean to say an investment is independent and not mutually exclusive?

Answer 1

Solution

Investments are said to be  independent if the cash flows of one project is not affected by the acceptance of other.On the other hand, in case of mutually exclusive projects the acceptance of one project adversely impacts the cashflows of other.

Thus in other words,in case of independent projects any number of projects can be chosen from the chioices,while in case of mutually exclusive projects ,for example 2 mutually exclusive projects only 1 can be chosen out of the 2.