![]() The two projects are not independent (the game machine will sell better with more games available) nor mutually exclusive (producing the games does not preclude producing the game machine). For example, VideogamesPlus may decide to introduce a new video game machine along with some games for the new system. In this case, the decision to take one project impacts our decision to take another, but they are not mutually exclusive. Many decisions made by the firm are neither independent nor mutually exclusive, but are instead interdependent. When we have independent projects, our decision rule does not need to rank which project is the best, but merely identify if the project is good or bad. Taking one project does not influence the other, so they are independent. McBurger could choose to take the new deep fryer or the new order placement, or it could choose both. The second is a new order placement system for the drive-thru. The first is a new deep frying system for their french fries. may have the following capital budgeting projects to consider. Independent (sometimes called stand-alone) projects are any set of projects in which choosing one has no impact on our decision to choose another project from that set. When we have mutually exclusive projects, our decision rule needs to not only decide if a project is good or bad, but needs to be able to rank which project is the best. ![]() We can only choose one of these options, so they are mutually exclusive. The first is a low-cost model that will need replaced in 3-years and the second is a more expensive model that will need replaced in 5-years. For example, we are considering upgrading our printing press and have the choice of two alternatives. Mutually exclusive projects are any set of projects in which choosing one makes the other projects no longer possible. Independent Projects Mutually Exclusive Projects
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