Effective Decision Making in Business: Calculation of Payback Period and NPV

BUSINESS DECISION
MAKING

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
1. Calculation of payback period in project A & B:.................................................................................3
2. Calculation of NPV:............................................................................................................................5
CONCLUSION...........................................................................................................................................8
REFERENCES............................................................................................................................................9

INTRODUCTION
It is essential for the organizations to take effective decisions in context of business process as it
will help in achieving success (Amuna, Al Shobaki, and Naser, 2017). There are various ways
for evaluating the purchasing decisions of the customers. The different kind of techniques used
for managing finance and budgeting. In this report, the chosen company is XYZ plc of UK.
These techniques of finance includes net present value, internal return rates. There are multiple
tasks for managing the project as per the given situation. There are two type of investment
appraisal methods used for managing the project.
MAIN BODY
1. Calculation of payback period in project A & B:
For project A:
Initial investment= 100000
Years Cash flow Cumulative cash flow
1 28000 28000
2 32000 60000
3 35000 95000
4 55000 150000
5 78000 228000
Payback period= Year before recovery + amount to be recover / next year cash flow
= 3 + 5000/55000
= 3+0.9 years