Understanding Decision Making in Business with NPV and Payback Period Methods

BUSINESS DECISION
MAKING

Table of Contents
ESSAY TOPIC................................................................................................................................4
INTRODUCTION...........................................................................................................................4
ESSAY BODY.................................................................................................................................4
Net present value with its benefits and drawbacks.....................................................................4
Payback period with its benefits and drawbacks.........................................................................6
Financial and non-financial factors.............................................................................................7
CONCLUSION................................................................................................................................8
REFRENCES...................................................................................................................................9

ESSAY TOPIC
“ Understanding over decision making in a business with the help of NPV method and
payback period method. Also different financial and non-financial factors”
INTRODUCTION
Business decision making is the an important part that exists within an organization for
making survival possible with the competitiveness of market with longer time period. Business
organization is engaged within various projects that is deriving towards making growth possible
with success. This makes selection possible to get maximum profit and effective results. The
essay is based over a case study of A&B Plc in which strategic management decides over
investment of funds to be done with software or Laundrette that has been outsourced previously.
Essay discuss investment with appraisal techniques which is benefiting drawbacks.
ESSAY BODY
A&B Plc this is an UK based hotel chain that is currently being operating within UK and
other parts of Europe also. In present hotel outsourced of different services that has been
including laundrette and hotel software because of insufficient amount with resources. Further
strategic manager decides over minimizing business cost that is undertaking either services. In
order to make a better decision, managers should use two kinds of investment that has made
appraisal techniques like NPV and payback period method. As per this scenario, initial
investment of hotel decides for undertaking software is £100,000 and is same for Laundrette wit
discount rate of £120,000
Net present value with its benefits and drawbacks
Net present value: If a business-like hospitality such as A&B plc is willing over investing
an new project within the method that is being used to make order for executing investment over
decision making. In this method various kinds of difference is there over presented value of cash
influx and cash outlay (Alam and Dornberger, 2019). The advantages of net present value
method for A&B Plc is that such factors is considered for presenting value of factors in which
real income is to be calculated along with all the factors like inflation and other types. This
method has helped hotel business in taking appropriate decision that boosts profit making and it
makes utilization of money in a way that it is being saved. Further with the help of NPV risk
factor can also be included in calculation by which hotel business can get clear picture about