Methods of Evaluating Financial Alternatives for Better Incomes

BUSINESS DECISION
MAKING

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
1. Calculation of payback period in project A & B:.................................................................................3
2. Calculation of NPV:............................................................................................................................4
3. Analysis:..............................................................................................................................................6
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10

INTRODUCTION
In order to generate better incomes, organizations must make critical spending decisions.
Various methods of evaluating financial alternatives systematically provide an overview. There
are range of techniques such as net present value, internal rate of return technique and many
more (Wang and Byrd, 2017).
The report is based on XYZ plc that is located in United Kingdom. As per the given scenario,
they have two projects and company has to choose one out of them. For this purpose two
investment appraisal techniques have been applied. As well as report covers information about
financial and non financial factors.
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