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Mutually Exclusive Projects. Mutually exclusive projects are projects in which acceptance of one project excludes the others from consideration. In such a scenario the best project is accepted. NPV and IRR conflict, which can sometimes arise in case of mutually exclusive projects, becomes critical. The conflict either arises due to the relative size of the project or due to the different cash flow distribution of the projects. Since NPV is an absolute measure, it will rank a project adding more dollar value higher regardless of the original investment required. IRR is a relative measure, and it will rank projects offering best investment return higher regardless of the total value added.
Project constraints are also considered to be somewhat mutually exclusive. In the project management triangle, it is assumed that making a change to one constraint will affect one or both of the others. For example, increasing the scope of the project is likely to require more time and money.