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Business Decision Making

   

Added on  2022-12-09

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BUSINESS DECISION MAKING
Business Decision Making_1

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5
Business Decision Making_2

INTRODUCTION
Investment appraisal is the technique to find out the profitability of the mutually
exclusive proposals and choosing the best alternative out of them. This process is also known as
the capital budgeting. This project shall be reflecting the two mutually exclusive proposals which
are to be compared on the basis of NPV, Payback period etc. Apart from that the project shall be
reflecting the financial and the non-financial factors that are used in the process of decision
making.
TASK
Two mutually exclusive projects:-
Project A: Belt
Initial investment: £ 170000
Project B: Trainers
Initial investment: £190000
Discounting rate: 14%
Calculation of the Net Present Value:-
Year Project A-
net cash
flows
Discounting
rate @ 14%
Present
value of
cash inflows
Project B-
net cash
flows
Discounting
rate @ 14%
Present
value of
cash inflows
0 -170000 -190000
1 45000 0.88 39600 50000 0.88 44000
2 45000 0.77 34650 45000 0.77 34650
3 35000 0.68 23800 70000 0.68 47600
4 70000 0.59 41300 90000 0.59 53100
5 82000 0.52 42640 90000 0.52 46800
Total 181990 226150
Project A
NPV:- PV of cash inflows – Present value of cash outflows
NPV:- 181990- 170000
NPV= 11990
The proposal is generating positive NPV of 11990.
Project B
1
Business Decision Making_3

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