An analysis on payback period, net present value, and financial and non-financial factors and how they aid in decision making

Business Decision Making

Contents
ESSAY TOPIC................................................................................................................................1
ESSAY BODY................................................................................................................................1
Introduction..................................................................................................................................1
Main body....................................................................................................................................1
Conclusion...................................................................................................................................4
REFERENCES................................................................................................................................5

ESSAY TOPIC
“An analysis on payback period, net present value, and financial and non-financial factors
and how they aid in decision making”
ESSAY BODY
Introduction
XYZ Plc is a budget hotel chain that has business operations in UK and some parts of Europe.
Currently, some services are outsourced by an organisation like laundrette and hotel software
system due to the lack of availability sources. Now, the strategic managers of the XYZ Plc want
to invest in a software or a laundrette project. In this regard, the projects are analysed on the
basis of tools like NPV, payback period and other financial & non-financial factors for the
purpose of benefiting an organisation in effective decision making (Baker, 2018).
Main body
Net present worth (NPV) is the distinction between the current estimation of money inflows and
the current estimation of money outpourings over some undefined time frame. It is utilized in
capital planning and venture wanting to break down the gainfulness of an anticipated speculation
or undertaking. In the current report, this is used by the management of XYX plc for analysis of
the two projects i.e. Project A- Software project and Project B- Laundrette project (Burgass,
Arlidge and Addison, 2018).
Formula related to the calculation of NPV
Calculation of NPV
PROJECT A: TECHNOLOGICAL PROJECT
Formula Calculation Result
Net cash flow for year 1 (Cash flows) / ( 1 + r)t (28000) / (1+11%)1 31080.03
Net cash flow for year 2 (Cash flows) / ( 1 + r)t (32000) / (1+11%)2 25971.2
Net cash flow for year 3 (Cash flows) / ( 1 + r)t (35000) / (1+11%)3 24962
1