Less Rate of Return and Less Net Present Value

The report highlights the importance of business decision-making in corporations, emphasizing the use of various techniques to take effective decisions. Investment appraisal techniques assess project viability, leading to high profitability and productivity. Additionally, measures of dispersion help predict future trends, increasing overall return. The report also emphasizes the effectiveness of questionnaires as a data collection method for organizations.

Business Decision Making

TABLE OF CONTENTS
Introduction......................................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Planning for the collection of primary and secondary data...................................................3
1.2 Survey methodology and sampling frame.............................................................................3
1.3 Sampling questionnaire to be used .......................................................................................4
2.1 & 2.2 Calculating mean, median and mode..........................................................................5
2.3 Calculating measures of dispersion.......................................................................................6
2.4 Using quartile, percentile and correlation coefficient............................................................6
TASK 3............................................................................................................................................7
3.1, 4.1 Line/ Bar graphs using spreadsheets...............................................................................7
......................................................................................................................................................8
3.2 Trend lines using spreadsheet for sales, costs and profit ......................................................9
TASK 4..........................................................................................................................................11
4.2 Calculating the project duration and critical path ...............................................................11
........................................................................................................................................................13
3.3 Presenting the findings.........................................................................................................13
3.4 Formal business report ........................................................................................................13
TASK 5..........................................................................................................................................14
4.3 Using financial tools for decision making...........................................................................14
CONCLUSION..............................................................................................................................15
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Illustration Index
Illustration 1: Line graph of sales, cost and profit...........................................................................9
Illustration 2: Bar graph of sales, cost and profit.............................................................................9
Illustration 3: Trend line of cost.....................................................................................................11
Illustration 4: Trend line for profit.................................................................................................11
Illustration 5: Trend line for sales..................................................................................................12
Illustration 6: Gantt chart...............................................................................................................14
Illustration 7: Critical path method................................................................................................14
Index of Tables
Table 1: Mean, mode and median....................................................................................................7
Table 2: Measures of dispersion......................................................................................................8
Table 3: Coefficient of correlation...................................................................................................8
Table 4: Table 4: Sales, cost and profit............................................................................................9
Table 5: Trend line table................................................................................................................11
Table 6: Activity table...................................................................................................................14
Table 7: IRR and NPV of project Super and Sonic.......................................................................17
Table 8: Payback period.................................................................................................................17
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INTRODUCTION
Business decision making is the imperative aspect which assists management to work
with integrity and take right decision in the direction of growth and success of the firm. Present
report is based on case study in which client wishes to launch new brand of trainers in London.
Thus report will cover the detail analysis regarding the market and marketing dynamics. Further,
analysis is done by collecting large amount of information through use of survey methodology.
In addition to this, forecasting is done for cost and profit analysis for the coming time span. It
proves to be effective in arranging necessary resources for business.
TASK 1
1.1 Planning for the collection of primary and secondary data
There are two types of data collected for the launching of new brand of trainers in
London. Here, both primary and secondary data will be collected in order to create strong
database. Primary data are those which are accessed first time in order to collect fresh and raw
data (Bazerman and Moore, 2012). On the other hand secondary are collected by using range of
sources which are already available. However, collection of primary data taken extensive time in
comparison to secondary data. Also, they are valid and authenticate enough for sowing evidence
for the study.
In this regard, primary data will be collected with the interaction of respondents
(Bojadziev and Bojadziev, 2007). It facilitates to understand the views and ideas of customers
and accordingly corporation can provide services to them. On the other hand, secondary data are
collecting by accessing wide range of secondary sources. It consists of journals, books and online
material.
1.2 Survey methodology and sampling frame
Survey methodology is the one of the effective method for collection of data from
respondents. It makes it possible for researcher to collect large amount of data in the direction of
completion of study (Dew, Sarasvathy and Wiltbank, 2009). Under this methodology sampling
frame plays vital role because appropriate number of people selected in the form of sampling are
distributed questionnaire in order to gather adequate information. Further, sampling represent the
individual unit of population to be studied. For the current research 30 respondents will be
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selected with the use of simple random sampling (Selecting the Survey Method, 2006). Here,
local will be selected because they can easily provide information regarding the services to be
provided to them in future. It enables scholars to approach respondents and conduct in-depth
survey with them (O’Fallon and Butterfield, 2005). However, respondents will be approached
through online survey and accordingly they will be provided questionnaire. Here, they will be
provided list of related questions so they can easily fill the same in order to meet the purpose of
research. In addition to this, respondents will be provided prior information regarding purpose of
survey.
1.3 Sampling questionnaire to be used
The sampling questionnaire which will be used to conduct online survey is shown as
follows. This will helps respondents to fill the questionnaire and provide the detail information
regarding the same. Here, both men and women are involved in the online survey-
1. Name
_________________________________
2. Gender
 Male
 Female
3. Age
 Below 20
 20-30Years
 30-40 Years
 40 and above
4. What is you occupation?
 Self employed
 Employed
 Student
5. Do you like graffiti art?
 Yes
 No
6. Do you agree that Graffiti design require in-depth knowledge?
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 Strongly agree
 Agree
 Neutral
 Disagree
 Strongly disagree
7. What you consider about the use of Graffiti design?
 Unique look
 Trendy
 Beautiful creation
 Way to present art
8. What are specific areas where you have seen Graffiti designs?
 Tunnel
 Pier
 Under this bridge
 Others
9. Do you find is feasible to use Graffiti in public areas
 Yes
 No
 Cannot say
2.1Calculating mean, median and mode
The following table is showing the number of prices within different price range. Here,
analysis of the table will be done with the help of mean, mode and median. It facilitates to take
right decision and ensure upward direction of business.
Table 1: Mean, mode and median
Amount Spent
(£)
No. of
orders (f) Mid (x) (x-m)^2
Cumulative
frequency fx
0-10 5 5 640.09 5 25
10-20 7 15 2992.09 12 105
20-30 10 25 39880.09 22 250
30-40 12 35 136678.09 34 420
40-50 14 45 336052.09 48 630
50-60 15 55 600160.09 63 825
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60-70 14 65 739084.09 77 910
70-80 13 75 855070.09 90 975
80-90 6 85 211324.09 96 510
90-100 4 95 108702.09 100 380
Total 100 5030
Mean 50.3
Mode 15
Median 15
Amount Spent
(£) Mid (x)
No. of
orders (f) CF
0-10 5 5 5
10-20 15 7 12
20-30 25 10 22
30-40 35 12 34
40-50 45 14 48
50-60 55 15 63
Median,
mode
60-70 65 14 77
70-80 75 13 90
80-90 85 6 96
90-100 95 4 100
Total 100
Mean Median Mode
Fx/N
5030/100=50.3
l+(N/2-cf)/f*h
=50+(50-48)/15*10=51.33
l1+((f1-f2)/2f1-f0-f2))*h
=50+(15-14)/(2*15-14-
14)*10
=50+(1/2)*10=55
2.2 Advising Karen for most popular price for orders
According to the above table, it has been found that mean of the above data is 50.3 which
is presenting the average value of different orders. On the other hand, mode for the series is 55
and median is 51.33. Here, mode is showing the number of order which is taking place very
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frequently. Apart from this, median divide the overall series into two distinct part and
accordingly the middle value has been found which is 15. Apart from this, analysis of calculation
is showing that most popular order lies in range of 56-60 because the number of order are higher
in this particular range. Accordingly, it can be said that customer most place order for 15. Thus
accordingly price will be set by the corporation. Therefore, all calculated figures from mode,
median and mean are indicating the same results.
2.3 Calculating measures of dispersion
The measures of dispersion are calculated as follows which provides detail information
related to different perspectives. In this regard, range, standard deviation and percentile as well
as inter-quartile range have been calculated-
Table 2: Measures of dispersion
Range
(Range = Higher value – shorter
value) 100-0 = 100
Standard deviation
(Standard deviation= √ variance) 24.39
Percentile 25 5.75
Percentile 75 14
Inter
(Inter-quartile range = Quartile 3-
Quartile 1) 14-5.75 = 8.25
Calculating correlation coefficient
Table 3: Coefficient of correlation
Temperature Sales
Temperature 1
Sales 0.9873330891 1
2.4 Using quartile, percentile and correlation coefficient
The quartile divides overall numeric data into four parts where some of them represent
the average value and lies in mean of the same series. Further, percentile segregate overall data
series into 100 equal parts and each of which series represent the information (Triantaphyllou,
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2013). Apart from this coefficient of correlation show that relationship among two variables.
According to the above table both temperature and sales has positive relation. It depicts that if
temperature will increase then sales will also be increased in the same direction and vice-versa.
The measures of dispersion consists of range, standard deviation and percentile.
According to the following table the range of data series is 100 whereas standard deviation is
24.39 (Saaty, 2008). It shows how spread data into set pattern so as to know the standard of
variation which could be accepted. On the other hand, 25th percentile of series is 5.75 where 75th
percentile is 14. It depicts that no any percentile lies in average value of order. In addition to this,
inter quartile range of data series is 8.25. Thus, 5.75% participants stated that average value of
order will remain till 15. On the other hand, 75th percentile depicts that the value of 14. It reflects
that highest % people also quote the same thing that order will be 15. In addition to this,
correlation coefficient of data series is 1. It depicts that sales and temperature are perfectly
correlation with each other and increase or decrease in one element will bring the same kind of
changes in other element.
TASK 3
3.1, 4.1 Line/ Bar graphs using spreadsheets
There are several kind of diagram used as per the following table. It assists corporation to
know the trend of the future business and accordingly plan for its growth and development. In
this regard, different kind of diagrams are listed as follows-
Table 4: Table 4: Sales, cost and profit
Year Sales (£000)- All regions All cost (£000) Final profit (£000)
2000 170 140 30
2001 190 130 60
2002 230 150 80
2003 240 150 90
2004 320 180 140
2005 340 180 160
2006 270 170 100
2007 250 150 100
2008 250 180 70
2009 260 160 100
2010 300 160 140
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Illustration 1: Line graph of sales, cost and profit
Illustration 2: Bar graph of sales, cost and profit
The above various diagrams are showing that in 2000 sales turnover was 170 and in 2001
it was 190. Further, in 2000 the sales turnover of the corporation was 140 which was 130 in
2001. Furthermore, with the passage of time sales turnover was increasing but the cost remain
constant or in decreasing or increasing order. For example in 2004 cost was 180 and in 2005 it
was same. Apart from this, in 2008 cost was the same. Apart from this, profitability has variation
according the sales turnover and cost (Kaplowitz, Hadlock and Levine, 2004). This is due to high
cost of production and low sales turnover. However, the reason for the same is additional cost of
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production. In addition to this, final profit in 2008 was 70 which again increased in later years as
2009 and 2010. Therefore, trend of profit and cost has great variations. Thus financial position of
Omega consultant is varying at greater level and accordingly future performance of corporation
can be anticipated effectively.
3.2 Trend lines using spreadsheet for sales, costs and profit
The following table is showing data regarding sales, cost and profit for next 3 years. This
helps in assessing the trend of all the series so as to make assumption for future business
activities (Prieto and Revilla, 2006). It enables corporation to plan for the necessary resources
and reduce the chance of losses to a great extent.
Table 5: Trend line table
Year
Sales
(£000)- All
regions
All cost
(£000) Final profit (£000)
2000 170 140 30
2001 190 130 60
2002 230 150 80
2003 240 150 90
2004 320 180 140
2005 340 180 160
2006 270 170 100
2007 250 150 100
2008 250 180 70
2009 260 160 100
2010 300 160 140
The trend line of sales cost and profit is showing the favorable results. It depicts that,
sales, profit and for total cost. It is showing that all cost remains favorable and accordingly
corporation can plan for future business activities (Steinhouse, 2010). This proves to be effective
to determine upward direction of corporation and meet the expectations of large number of
buyers. On the other hand, foresting of cost leads to plan for future production so as to increase
sales turnover and profitability in the same direction.
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Illustration 3: Trend line of cost
Illustration 4: Trend line for profit
The trend line of profit is going upward which is showing that with the increase in time.
Company is also increasing its profitability. Here, forecsting is done for future time span and the
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indication is showing that upward trend prove ot be effectbein creasingcompetitive edge odf the
firm with increased rate of return (Greenbank, 2009).
Illustration 5: Trend line for sales
The trend line of sales is also showng the upward trend. It depicts that sales turnover is
increasing day by day. However, in 2004 and 2005 sales turnover increased at rapid speed but
the same is low in 2007, 2008 and 2008. On the other hand, in 2010 again the sales turnover has
been increased due to good performance of corporation. It facilitates to increase overall rate of
return.
3.3 Presenting the findings
Covered in power point presentation
3.4 Formal business report
The formal business report has been prepared to provide detail information to
management of corporation regarding the new brand of trainers.
To, the director of Omega consultant
Introduction
The research is done to analyze the market situation for introducing new brand of
trainers in London. In this regard research has been done by conducing online survey. Here,
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both primary and secondary data are collected from men and women.
Methodology
The present report is base on qualitative type of investigation where primary data are
collected with questionnaire. Further, simple purposive sampling has been used to approach
respondents. Furthermore, measures of dispersion has quantitative tool is used for deriving
valid conclusion from the collected data and accordingly provide suggestions to management
of corporation.
Findings
The collection of both primary and secondary data are showing that both profitability
and sales turnover of corporation will go in the upward direction. Thus, new brand of trainer
can be launched. It assists organization to meet the expectations of number of customers and
accordingly create competitive edge of the firm in the marketplace.
Conclusion
According to the collection of primary data it has been found that market performance of
Omega consultant is up to the market. Owing to this, new brand of trainer can be launched so as
to determine high profitability and good reputation of corporation. It can also be said that
selected methodology is helpful in assessing the market situation and accordingly catering need
of buyers.
TASK 4
4.2 Calculating the project duration and critical path
The Ace Investment Limited wants to start new project which require following activities
to be performed in order to complete the project. Project management refers to specific
techniques which are used to conduct the business in smooth manner. The reason behind the
same is saving of time as well as cost. However, an organization pay high cost at the initial stage
but aid this cost give long run benefit to company (Casali, 2007). It will be done by using critical
path method. This technique facilitates to complete all project activities in less time and
accordingly achieve the specified objectives of corporation. It leads to cater need of different
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customers in an effectual manner. This leads to complete the project on right and increase overall
rate of return of corporation.
Table 6: Activity table
S. no. Task Name Duration Start Finish Predecessors
1 A 4 days Wed 04-11-15 Mon 09-11-15
2 B 2 days Tue 10-11-15 Wed 11-11-15 1
3 C 36 days Tue 10-11-15 Tue 29-12-15 1
4 D 15 days Thu 12-11-15 Wed 02-12-15 2
5 E 4 days Thu 03-12-15 Tue 08-12-15 4
6 F 9 days Wed 09-12-15 Mon 21-12-15 5
7 G 9 days Tue 22-12-15 Fri 01-01-16 6
8 H 2 days Wed 30-12-15 Thu 31-12-15 3
9 I 10 days Thu 12-11-15 Wed 25-11-15 2
10 J 9 days Thu 03-12-15 Tue 15-12-15 4
11 K 20 days Mon 04-01-16 Fri 29-01-16 7,8,9,10
12 L 20 days Mon 01-02-16 Fri 26-02-16 11
Total 140 days
According to the above table, Gantt chart has been made as follows. It is showing all the
information regard each activity to be performed in the project along with time taken for each.
Furthermore, Gantt chart is just representation of all activities to be performed in project along
with time (Hedgebeth, 2007). It assists project manager to define roles and responsibilities of all
members of team. It enables project manage to arrange for necessary resources and plan
accordingly. This diagram facilitates to apply the effective tools whereby cost as well as time
taken in the project can be reduced to a great extent.
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The above table is showing that project will be completed in 140 days. However by
applying technique of project management, overall cost as well as time taken can be reduced to a
great extent. Here, critical path shows that project will be completed in 83 days. It facilitates to
carry out all business activities in an effectual manner. Following diagram is showing all
activities to be covered in the critical path. Furthermore, activities covered in critical path are
1+2+4+5+6+7+11+12=83 days.
Illustration 7:
Critical path method
The critical path method is the foremost way to complete a project. It makes it possible
for project manager to conduct two or more than two activities together for cutting extra time.
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Illustration 6: Gantt chart

However, it may incur some additional cost but proves to be effective in saving overall time.
Thus, use of critical path is the effective method to create competitive edge of the corporation in
the marketplace with increased rate of return (Bazerman and Moore, 2012).
TASK 5
4.3 Using financial tools for decision making
There are two project available for local construction company such as Project Super and
project Sonic. The cost of project has already been given so different investment appraisal
techniques have been applied on the same to select the best project. These techniques are
analyzed as follows- Net present value method-It is the most effective method to analyze right kind of project.
With the help actual value of money will be analyzed in future time span. From the
following table, project Sup[er should be accepted because it is generating great
profitability. On the other hand, project Sonic is generating less profitability hence it
cannot be accepted (Dew, Sarasvathy and Wiltbank, 2009).
 Internal rate of return method-This is another method investment appraisal wherein
management select the right project. Under this, project Sonic is having high profitability
hence it should be accepted in order to determine long run profitability of the
construction business.
Table 7: IRR and NPV of project Super and Sonic
Year Project Super Cash flow (£) Project Sonic Cash flow (£)
Investment -200000 -200000
1 35000 218000
2 80000 10000
3 90000 10000
4 75000 4000
5 20000 3000
NPV £26,542.41 £16,867.50
IRR 16% 19%
 Net present value=Total present value method-Initial investment
 IRR=A+(PVA-C/PVA-PVA)*(B-A)
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Table 8: Payback period
Payback
2+(115000/205000) =
2.56 years Payback period method-This is another effective method for the selection of right
project. It assists corporation to select only that project whose cost can be recovered in
less time span. Furthermore, above table is showing project Super should be accepted as
it can recovered in 2.56 years. Thus, two of the investment appraisal techniques are
showing that project Super need to accepted.
Report for the board members
To board of director
Date: 7th December 2015
By applying investment appraisal it has been found that corporation should accept project
Super as it can recovered in less time span. Also, it is generating high rate of return. It assists
that management should take decision in the favor of first project so as to invest in new project.
This in turn cost can be reduced to a great extent and in the same way profitability can be
enhanced. Furthermore, project Sonic will be rejected due to less rate of return and less net
present value. Therefore, project Super is effective in term of cost, benefit and recovery of
initial investment.
CONCLUSION
The aforementioned report concludes that business decision making is the crucial process
which require use of wide range of techniques. It assists corporation to take right decision in
carrying out all business activities in an effectual manner. It can also be said that, investment
appraisal techniques are used to assess the viability of project. It leads to determine high
profitability as well as productivity. In addition to this, measure of dispersion facilitates to assess
the trend of future which in turn increases overall rate of return. Furthermore, questionnaire as
effective means for data collection proves to be effective for organization.
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