Please respond to the DQ with at least 150-200 words.1. What is a mutu

QUESTION

Please respond to the DQ with at least 150-200 words.1. What is a mutually exclusive project? How should managersrank mutually exclusive projects?2. What are three potential flaws with the regular paybackmethod?Does the discounted payback method correct all three flaws?
1. What is a mutually exclusive project? How should managersrank mutually exclusive projects? Mutually exclusive projects mean availability of variousalternative projects for the investment in a project. For exampleif an investor wants to invest in shares, he has the so manymutually exclusive alternatives. Ranking of mutually exclusive projects : The selection process and Ranking of mutually exclusive projectsdepends on the information given. Here are giving some examples of information given and rankingprocess according to that example: 1. If cost of mutually exclusive projectsare given: Ranks will be given according to least cost. 2. If pay back period is given: Ranks will be given according to lesser pay back period. 3. If Net Present Value (NPV) is given: Ranks will be given according to highest NPV. 4. If Profitability Index (PI) isgiven: Ranks will be given according to highest PI. Note: PI should be

. 5. If Average Rate of Return (or)Accounting Rate of Return (ARR) is given: Ranks will be given according to highest ARR. 6. If Internal Rate of Return (IRR) isgiven: Ranks will be given according to highest IRR. 2. What are three potential flaws with the regular pay backmethod? Does the discounted pay back period methodcorrect all three flaws? Three flaws in regular pay back method: 1. Assumes that the project generatesconstant annual cash flows. 2. It is not giving importance to the timevalue of money. 3. It is not consider the risk factor. All the three flaws are corrected by the discounted pay backperiod.

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