Business Decision Making

Business Decision
Making

Contents
INTRODUCTION...............................................................................................................................3
MAIN BODY.......................................................................................................................................3
CONCLUSION....................................................................................................................................7
REFERENCES....................................................................................................................................8

INTRODUCTION
Business decision can be defined as set of actions which are purposely chosen from
different alternatives in order to achieve organisational predetermined goals and objectives
(Koporčić, Tolušić and Rešetar, 2017). Decision making is a continuous as well as crucial
component which is used by managerial department in order to manage all the business
activities effectively. In this report, this process is going to be conducted for XYZ plc which
is a budget hotel chain. This organisation is trading in the UK as well as in the some parts of
Europe. Now, organisation is facing some issue as their laundrette and hotel software system
have been outsourced thus they are looking to invest in software. Therefore, they wants to
analyse payback period and NPV, financial and non-financial factors that they can used to aid
decision making.
MAIN BODY
1. Calculation of payback period in project A & B
Payback period is basically refers to an amount of time that are takes to recover the
appropriate cost of n organisational investment. In context of XYZ, there are specific
information of two projects are determine in order to find one better option between them as:
Project A – Software Project
Year Net cash flow Cumulative Cash Flow
1 £ 28,000 28000
2 £ 32,000 60000
3 £ 35,000 95000
4 £ 55,000 150000
5 £ 78,000 228000
The net initial investment sum of Project A – Software Project is £100000. In 3rd year,
£95000 out of £100000 would be recovered; remaining £5000 will be recovered in next 1.1
months.
Payback period = 3 + (5000 / 55000 * 12)