Business Decision Making

Business Decision
Making

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Calculation of pay back period and net present value along with analysis of non-financial and
financial factors that are used in decision making.......................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Business decision making could be defined as the procedure which is focused by all the
business entities while taking specific decisions for betterment of the company. With the help of
it long-term predetermined goals are accomplished (He, Wang and Akula, 2017). Present essay is
based upon A & B Plc which is a restaurant chain. It is planning to invest in a new project. There
are two options available for the same purpose. These are dishwashing or software. For the
purpose of selecting one option different aspects will be analysed in this essay. These are net
present value, pay back period, financial and non-financial factors.
MAIN BODY
Calculation of pay back period and net present value along with analysis of non-financial and
financial factors that are used in decision making
A & B Plc is a restaurant chain which is operating its business in United Kingdom and
some of the locations of Europe. Currently it is facing the issue of lack of availability of
resources due to which it is outsourcing dishwashing and software. The strategic managers of the
entity are planning to invest in a new project and they can only invest in one of the options
available. These are software or dishwashing. The investment which will be required for
dishwashing will be around 120000 and for software project it will be 150000. For the purpose
of formulating the final decision different aspects such as NPV, pay back period, financial and
non-financial factors are focused which are discussed below:
Payback period is a capital budgeting method which is used while appraising
investments. With the help of it, it could be determined that in how much time period the
investment will be able to be recovered. It can guide the entity that the project which are
proposed should be selected for the purpose of investment or not (Kimmel, Weygandt and Kieso,
2018).
Formula: Completed years + Initial investment – cumulative cash inflow of the
completed year / cash inflow of next year
Calculations:
Project A:
Year Project A
Cumulative
Cash flow
0 -1,20,000 -
1