Business Decision Making

Business Decision Making

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Calculation of payback period....................................................................................................1
Calculation of net present value..................................................................................................2
Examining the financial and non-financial factors and also its implication on the stakeholders
and decision making process.......................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Business decision making is useful in effectively gathering key information and helps in
effectively organizing the activities of the business (Shaban, Al-Zubi and Abdallah, 2017). This
study will critically focus on effectively examining the key relevant tools which mainly includes
net present value and payback period. Furthermore, this study is also significant in evaluating the
non- financial and financial factors which usually helps in the relevant decision making.
MAIN BODY
Calculation of payback period
Computation of Payback period
Project A Project B
Year
Cash
inflows
Cumulative cash
inflows
Cash
inflows
Cumulative cash
inflows
1 30000 30000 40000 40000
2 35000 65000 45000 85000
3 40000 105000 50000 135000
4 60000 165000 75000 210000
5 90000 255000 80000 290000
Initial
investment 120000 150000
Payback period 3 3
0.4 0.3
Payback
period
3 year and 4
month
3 year and 3
months
Interpretation: Payback period is the considerable amount of time which is required in order to
significantly recover the cost linked with the investment (Oruganti, Mittal, McBurney, and
Rodriguez Garza, 2015, February). It is the length of time where the investment reach the
specific break-even point. The longer payback period is not considered to be as the desirable
form of payback period. The payback period of the Project A is estimated to be 3 year and 3
1