Business Decision Making

BUSINESS DECISION
MAKING
1

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Calculation of payback period.....................................................................................................3
Working out of Net Present Value...............................................................................................4
Financial factors...........................................................................................................................5
Non financial factors....................................................................................................................6
2

INTRODUCTION
Business decision making, this term can be refer as the procedure used by manager for select the
best alternatives through which they are able to generate more profits and maintain positioning
market. To understand this concept XYZ has been taken this firm is a part of hotel chain of
United Kingdom. This report defines the uses of capital budgeting techniques for analysing the
future flow and time required to cover up the cost. This report also defined factors which are
essential for manager before taking any decision regarding their business.
TASK 1
Calculation of payback period
Payback period: The technique which is used by small firm for identifying the time period they
require to cover up the cost value of initial investment, is known s payback period. Payback
period is a time period through which manager can easily analyse and compare all the
alternatives time they require to recover project cost. On the basis of analysis manager select
alternative which take minimal time to cover up the cost. This technique is used because of their
easy calculating and interpretation (Jiang, Ho, Yan and Tan, 2018).
Payback period for Project A (Software Project)
Year Cash inflow in £ Cumulative cash inflow
1 28,000 28000
2 32,000 60000
3 35000 95000
4 55000 150000
5 78000 228000
Formula of payback period= Base year +Initial investment- Cumulative cash inflow of base
year / Upcoming year cash inflow
3+100000-95000/55000= 3.90
Payback period for project B (Laundrette Project)
Year Cash inflow in £ Cumulative cash inflow
1 31000 31000
2 38000 69000
3