Business Decision Making: Machinery Purchase

Business decision
making

Table of Contents
Introduction-................................................................................................................................................3
Solution 1 (a)...............................................................................................................................................3
Solution 1(b)-..............................................................................................................................................6
Solution 1(c)-...............................................................................................................................................9
Conclusion-.................................................................................................................................................9
References-................................................................................................................................................10

Introduction-
This report is based on decision making of machinery purchase. Company needs to follow steps
to solve problems by comparing options and decisions also reviewed to check whether decision
is right or not. Company has two options between them company needs to choose one. Company
is using capital budgeting methods for assessment of investment. This method includes net
present value, payback period, internal rate of return and acquired rate of return. These methods
are compare the projects and give the best decision making power to company.
Task 1-
Solution 1 (a)
(1)- Payback Period
Project A - Dysn Model 1
Yea
r
Net Cashflows Cumulative cashflows
1 120000 120000
2 90000 210000
3 75000 285000
4 80000 365000
5 10000 375000
Initial
Investment
250000
Payback period = 2 years + [(250000 - 210000) / 75000 * 12
months
2 Years + (40000 / 75000) * 12 months
2 years + (0.533 * 12 months)
2 years + 6.396 months