Business Decision Making

Business Decision
Making

TABLE OF CONTENTS
Introduction................................................................................3
Main body..................................................................................3
1. Calculation of Pay Back Period..........................................3
2. Calculation of NPV............................................................4
3. Analysis..............................................................................5
Conclusion.................................................................................7
REFERENCES..........................................................................8

INTRODUCTION
The decision making process of business involves analysis of goals by gathering relevant
information by weighing the alternatives in order to make important decisions (Weygandt and
et.al., 2020). The importance of decision making for business is to reduce possibility of mistake
while accomplishing target goals of firm. This report is based on Genesis & Dreams Ltd which is
a construction company of UK. The management of firm wants to diversify their resources for
which they have been offered several business proposals. The objective of this report is to
provide recommendation to firm that which proposal is more beneficial to Genesis & Dreams
Ltd by evaluating pay back period and NPV.
MAIN BODY
1. Calculation of Pay Back Period
Payback period determines an amount of time that takes to recover the cost of
investment. It basically includes length of time an investment takes in order to reaches a break-
even point (Kimmel, Weygandt and Kieso, 2018). The analysis of two projects are:
Payback period:
Project A (Motor software project)
Initial investment: £70,000
Year Cash flow Cumulative cash flow
1 18000 18000
2 16000 34000
3 19000 53000
4 22000 75000
5 37000 112000
Payback period: Year before recovery + amount to be recover/next years’ cash flow
= 3+ (70000-53000)/22000