Methods of Evaluating Financial Alternatives for Decision Making in Business

BUSINESS DECISION
MAKING

Contents
INTRODUCTION.......................................................................................................................................4
MAIN BODY..............................................................................................................................................4
1. Calculation of payback period in project A & B:.................................................................................4
2. Calculation of NPV:............................................................................................................................5
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10

INTRODUCTION
Organizations need to make important purchasing decisions in order to create better
earnings. A deliberate overview is provided by different methods of evaluating financial
alternatives. There are a variety of techniques like net present value, internal return rates and
many more (Koporčić, Tolušić and Rešetar, 2017). This report is based on the XYZ plc in the
UK. They have multiple tasks, according to the given situation, and companies must choose one
of them. Two investment appraisal methods have been used for this reason. Also included is the
report on financial and non-financial factors.
MAIN BODY
1. Calculation of payback period in project A & B:
For project A:
Initial investment= 100000
Years Cash flow Cumulative cash flow
1 28000 28000
2 32000 60000
3 35000 95000
4 55000 150000
5 78000 228000
Payback period= Year before recovery + amount to be recover / next year cash flow
= 3 + 5000/55000
= 3+0.9 years