Business Decision Making: Calculation of Payback Period and NPV

BUSINESS DECISION
MAKING

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Calculation of payback period....................................................................................................3
Calculation of NPV.....................................................................................................................4
ANALYSIS......................................................................................................................................5
a) Comparing and contrasting the payback period and the NPV................................................5
b) Using financial and non-financial factors and their implication on stakeholders and decision
making process............................................................................................................................6
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial decision making is the major consideration in which all the necessary decisions
are being taken in terms of monetary and non-monetary aspects so that they can analyse their
financial position of the company. These all major decisions are analysed so that they can leads
to increase the profitability or the financial position of the company in the given market(Secundo
and et. al., 2021). This report is based on the AJ plc which predicts the aspects that are being
taken by the stakeholders in order to invest in the business. It is the chocolate manufacturing
company which is established in UK ans operating their business as well so that they can leads to
have higher sales as well. This report will cover the NPV and the payback period by the
stakeholder and the comparing between the two project in order to take the decisions for
investing in the business and also focusing on choosing the best financial method to invest.
TASK
As per this, project AJ plc has shown their cash flow that is required for completing the
project. There are two project A (Vegan chocolate) and the initial investment made by them is
£140,000 and project B (Vegan spread) and the initial investment by them is £120,000. the
discount rate is 11% and the overall net outflow is shown in the table.
Year Project A – Vegan chocolates
Net cash flow £
Project B –Vegan spread
Net cash flow £
1 52000 46000
2 58000 60000
3 82000 72000
4 105000 89000
5 118000 108000
Calculation of payback period
Payback period is the technique of analysing the capital budgeting and it is the certain
period that is used by the shareholder in order to get the time needed for recovering the amount
that is initially invested in the given project(Curtis, 2020). In this aspects, they have to find out
the time in order to recover the given amount and further, comparison is being done for taking
right investing decisions.
SOLUTION: