, if the cash flows of one are unaffected by the acceptance of the other.

Mutually Exclusive, if the cash flows of one can be adversely impacted by the acceptance of the other.

How do we figure out?

There are six methods to do so;

1. Net Present Value (NPV)

2. Internal Rate of Return (IRR)

3. Modified Internal Rate of Return (MIRR)

4. Profitability Index (PI)

5. Payback

6. Discounted Payback

Steps in capital budgeting:

1- Estimate cash flows (inflows & outflows):

2- Assess risk of cash flows.

3- Determine r = WACC for project.

4- Evaluate cash flows.

As you continue your discussions, please provide different examples for some of the above mentioned methods.