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Richard is an analyst for Wellington Investment Management Services Inc. (WIMSI). He is evaluating capital budgeting proposals for WIMSI's client, Cambridge Equipment Company. The first
Richard is an analyst for Wellington Investment Management Services Inc. (WIMSI). He is evaluating capital budgeting proposals for WIMSI's client, Cambridge Equipment Company. The first step is to classify the capital investment proposals. To assist Richard, read the description of the projects in the box below and indicate whether they should be classified as mutually exclusive, contingent, or independent projects. Cambridge Equipment Company wants to upgrade its quality assurance (QA) technology and will replace all of its existing equipment with state-of-the-art machines. A second project involves retraining all QA and related personnel on the new equipment. An outside firm will conduct this two-week training program. These projects should be classified as: Independent projects Contingent projects Mutually exclusive projects While taking a break, Richard confides to you that he sometimes gets confused about the differences between mutually exclusive, independent, and contingent projects. Help Richard understand these differences by reviewing the choices below and selecting the response that best explains differences between a mutually exclusive and an independent project. An independent project is one whose acceptance precludes the acceptance of one or more other projects, whereas a mutually exclusive project is one whose acceptance (or rejection) has no effect on the acceptance or rejection of the firm's other projects. A mutually exclusive project is one made necessary by increased consumer demand, whereas an independent project is one made necessary by the need to reduce costs. A mutually exclusive project is one whose acceptance precludes the acceptance of one or more other projects, whereas an independent project is one whose acceptance is dependent on the adoption of one more other projects. A mutually exclusive project is one whose acceptance precludes the acceptance of one or more other projects, whereas an independent project is one whose acceptance (or reiection) has no effect on the acceptance or rejection of the other proiects
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