Business Decision Making

Business Decision Making

TABLE OF CONTENTS
Determining the profitability of investment proposals for XYZ plc......................................3
Effect of financial and non-financial factors used in decision making..................................6
REFERENCES...........................................................................................................................7

The investment based decision making is an important part of business as it is the key
function of the management to take proper business decisions. These decisions might be for
business expansion or contraction. This essay provides an in depth understanding of various
investment appraisal techniques based on which the investment plan of XYZ plc will be
taken.
Determining the profitability of investment proposals for XYZ plc
The company will be using net present value and payback period approach for the
purpose of evaluating the profitability associated with the two projects.
Net present value
It is the capital budgeting strategy which considers the current estimation of income
for deciding the productivity related with the task. It is the difference between the current
estimation of cash inflow and cash outflow (Pichugina, 2016). The positive NPV
demonstrates that the organization can continue with its investment plan and put resources
into it. Then again, the negative NPV shows that the venture isn't beneficial and attainable for
the business.
Project A
Computation of NPV
Year Cash inflows
PV factor
@ 11%
Discounted
cash
inflows
1 28000 0.901 25225.2
2 32000 0.812 25972
3 35000 0.731 25592
4 55000 0.659 36230
5 78000 0.593 46289
Total discounted cash
inflow 159308
Initial investment 100000
NPV (Total
discounted cash
inflows - initial
investment) 59308