# Mutually Exclusive: What It Means, With Examples

## What Is Mutually Exclusive?

Mutually exclusive is a statistical term describing two or more events that cannot happen simultaneously. It is commonly used to describe a situation where the occurrence of one outcome supersedes the other. For example, war and peace cannot coexist at the same time. This makes them mutually exclusive.

### Key Takeaways

• Events are considered to be mutually exclusive when they cannot happen at the same time.
• The concept often comes up in the business world in the assessment of budgeting and dealmaking.
• If considering mutually exclusive options, a company must weigh the opportunity cost, or what it would be giving up by choosing each option.
• The time value of money (TVM) is often considered when deciding between two mutually exclusive choices.
• Not mutually exclusive means that two instances or outcomes can occur simultaneously, and one outcome does not limit the other from being possible.

## Understanding Mutually Exclusive

Mutually exclusive events are events that can't both happen, but should not be considered independent events. Independent events have no impact on the viability of other options. For a basic example, consider the rolling of dice. You cannot roll both a five and a three simultaneously on a single die. However, you absolutely can roll a five and a three on two dice. Rolling a five and three simultaneously means this outcome is mutually exclusive. Rolling a five on one and a three on the other means they are not mutually exclusive outcomes.

### Opportunity Cost

When faced with a choice between mutually exclusive options, a company must consider the opportunity cost, which is what the company would be giving up to pursue each option. The concepts of opportunity cost and mutual exclusivity are inherently linked because each mutually exclusive option requires the sacrifice of whatever profits could have been generated by choosing the alternate option.

The time value of money (TVM) and other factors make mutually exclusive analysis a bit more complicated. For a more comprehensive comparison, companies use the net present value (NPV) and internal rate of return (IRR) formulas to mathematically determine which project is most beneficial when choosing between two or more mutually exclusive options.

## Example of Mutually Exclusive

The concept of mutual exclusivity is often applied in capital budgeting. Companies may have to choose between multiple projects that will add value to the company upon completion. Some of these projects are mutually exclusive.

## The Bottom Line

Things that are mutually exclusive are not able to occur simultaneously. In business, this is typically concerning the undertaking of projects or allocating a budget. If two things are not mutually exclusive, it means the existence and occurrence of one does not necessarily mean the other cannot coexist.

Open a New Bank Account
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.