Business Decision Making

Business Decision
Making

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
Application of investment appraisal techniques....................................................................3
Factors to be considered for undertaking decisions...............................................................5
CONCLUSION..........................................................................................................................6
REFERENCES...........................................................................................................................7

INTRODUCTION
An important function for any business undertaking or for implementing any activity
is taking decisions which provides assistance to the management in effectively handling the
business operation resulting into achieving the desired objectives. This essay revolves
implementing various types of capital budgeting technique for the purpose of evaluating the
feasibility of the investment proposal provided by Genesis & Dreams Ltd. It also covers the
various aspects which the business organization should take care about while taking the
decision.
MAIN BODY
Application of investment appraisal techniques
Investment decision making is considered as the most crucial function for any
business as it involves huge amount of capital investment and if it is not involved into the
right place then it might result into incurring losses for the company. Therefore, NPV and
payback period analysis is used for the purpose of evaluation of the projects.
Net present value
The NPV technique is utilized by the business organization with the sole objective
of identifying the present worth of the future cash inflow that will be generated through the
current investment proposal (Kengatharan and Clamenthu, 2017). It is desirable to have
higher and positive NPV.
Calculation of NPV of Project A
Year Cash
inflows
PV
factor
@
14%
Discounted
cash inflows
1 18000 0.877 15789.47
2 16000 0.769 12311.48
3 19000 0.675 12824.46
4 22000 0.592 13025.77
5 37000 0.519 19216.64
Total discounted cash
inflow 73167.82
Initial investment 70000