Investment Appraisal and Decision Making

This assignment provides a comprehensive analysis of investment appraisal techniques, specifically focusing on NPV and IRR. A case study is presented for Murano's proposal, which yields a negative NPV and an IRR of 10%. The report concludes that the proposed investment plan will not aid in profitability and suggests exploring alternative proposals or plans to achieve desired outcomes.

Business Decision Making

Table of Contents
INTRODUCTION......................................................................................................................1
1.1 Stating plan for the collection of primary and secondary data set...................................1
1.2 Designing survey methodology and sampling frame.......................................................2
1.3 Framing questionnaire for survey and the collection of primary data set........................2
2.1 Creating information for decision making.......................................................................4
2.2 Assessing mean, mode and median from secondary data set...........................................6
2.3 Analyzing data set through using measures of dispersion...............................................7
2.4 Quartile, percentile and correlation co-efficient..............................................................7
TASK 2......................................................................................................................................8
3.1 Graphical presentation.....................................................................................................8
3.2 Creating trend line for forecasting future trends..............................................................9
3.3 Preparing business presentation.....................................................................................10
3.4 Formal business report...................................................................................................10
TASK 3....................................................................................................................................11
4.1 Stating the use of information processing tools in the decision making aspects...........11
4.2 Determination of critical on the basis of business plan..................................................11
..............................................................................................................................................12
4.3 Use of investment appraisal tools in evaluating the viability of proposal.....................12
CONCLUSION........................................................................................................................14
REFERENCES.........................................................................................................................15

INTRODUCTION
In the present era, from expansion to new establishment business entity has to take
strategic decisions for attaining success in the competitive environment. Hence, for effective
decision making it is highly required for the business entity to consider both monetary and
non-monetary criteria’s. Considering the success of existing restaurant unit and tourism trend
in UK owner of Murano is planning to establish another unit. In this regard, for ensuring high
level of growth and success business entity will lay emphasis on organizing research with the
motive to assess the expectation level of customers. Hence, present report will provide deeper
insight about the results of primary and secondary data set. It also entails the extent to which
to sales and profit margin of such restaurant will incline in the near future. Further, such
assessment helps in understanding about the manner in which statistical and financial tools
aid in decision making.
TASK 1
1.1 Stating plan for the collection of primary and secondary data set
For assessing or getting information about the customers preferences regarding
dinning services of Murano researcher data has taken decision in relation to gathering data
from both primary and secondary sources. Hence, plan for data collection is as follows:
Primary data collection plan
 In the first step, out of several methods such as observation, focus group, interview
etc, survey method is selected by the researcher.
 Once primary data collection method has selected thereafter for conducting survey in
the best possible way researcher will select sample. For instance: Through the means
of random sampling 25 respondents have been selected on which study will be
focused.
 Under third step, scholar will prepare questionnaire by including question regarding
menu preferences, pricing and promotional aspects etc.
 Hence, in the last stage by sending questionnaire to the customers or potential
respondents on their mail id primary data will be gathered by the scholar.
Secondary data collection plan: For the collection of secondary data, books, journals as
well as scholarly articles related to restaurant trend will be evaluated by the researcher

through the means of internet. This in turn provides information about market trend and
analyzing information gathered via survey in an appropriate manner (Drucker, 2017). Along
with this, financial data regarding sales and profit will also be evaluated by the researcher for
effective decision making.
1.2 Designing survey methodology and sampling frame
 Survey methodology: It refers to the process that is undertaken by the researcher for
carry out survey in the best possible way. Survey methodology helps in conducting
investigation in a structured way and presenting suitable solution of the concerned
issue (Wheelen and Hunger, 2017). In this, to analyze the preference of customers and
for the collection of primary data set on time online survey methodology has been
chosen by the researcher. In accordance with such aspect primarily, mail id of
customers will be acquired by the researcher. Thereafter, by sending questionnaire on
the mail-id of customers survey will be conducted by the researcher. In this, by
requesting respondents in relation to filling questionnaire primary data will be
gathered,
 Sampling frame: There are mainly two types of sampling techniques such as
probabilistic and non-probabilistic that can be used by the researcher to determine
appropriate sample (Beach and Lipshitz, 2017). In this, by using simple random
sampling technique 25 respondents have been selected by the researcher. Such
technique is the part of probabilistic mode which in turn completely avoids the level
of biasness and assists in doing investigation in an accurate manner.
1.3 Framing questionnaire for survey and the collection of primary data set
In order to get suitable information for decision making through the means of survey
questionnaire has designed by the scholar. Thus, to evaluate preferences of customers
regarding product, price, place and promotion both open as well as close ended questions
were included by the researcher in questionnaire.
Questionnaire
Demographic information
Name....
Age....
Occupation....

Q.1 How often do you visit the restaurant of Murano?
 Once in a week ()
 Two times in a week ()
 Once in a month ()
 Other (Kindly specify)
Q.2 According to you, dinning services of Murano comes under which one of the following
category?
 Poor ()
 Average ()
 Good ()
 Better ()
 Best ()
Q.3 Are you satisfied with the staff services of Murano?
 Satisfied ()
 Highly satisfied ()
 Neutral ()
 Dissatisfied ()\
 Highly dissatisfied ()
Q.4 At the time of selecting restaurant which criteria is most preferred by you?
 Restaurant concept ()
 Food quality ()
 Service ()
 Price ()
 Convenience ()
 Ambiance ()
Q.5 Which kind of restaurant style is preferred by you?
 Homey ()
 Modern ()
 Traditional ()
 Mixed style ()
Q.6 On what time, do you like to visit restaurant?
 Breakfast (9am to 11am)
 Lunch time (12pm to 5 pm)
 Dinner(8pm to 12 pm)

Q.7 Do you agree that services of Murano give high value for money?
 Agree ()
 Strongly agree ()
 Neither agree nor disagree ()
 Disagree ()
 Strongly disagree ()
Q.8 Which kind of promotional mode has high influence on your decision making?
 Newspaper ()
 Television ()
 Newspaper and television both ()
 Social media ()
Q.9 In the near future, do you recommend restaurant services to your friends and family
members?
 Yes ()
 No ()
Q.10 Which location do you like to consider while making selection of restaurant.........Kindly
specify
Q.11 Do you want to give any recommendation for the purpose of improvement ........Please
specify with the reasons
2.1 Creating information for decision making
Primary data assessment
Theme 1: Dinning services of Murano comes under which one of the following category
Particul
ars
Responde
nts
% of
responde
nts
Poor 2 8%
Average 3 12%
Good 4 16%
Better 10 40%
Best 6 24%
Total 25 100%

Poor Average Good Better Best
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
% of respondents
% of respondents
Interpretation: The above depicted column graph presents that 40% respondents
consider the services of Murano as better. Along with this, 24% respondents said that dinning
services of the restaurant unit are best. On the other side, 16% respondents entail that
Murano’s services are good. One of the respondents said that hot and fresh food is served by
the restaurant unit. Along with this, respondents said that staff of such restaurant unit is
highly polite.
Theme 2: At the time of selecting restaurant food quality is the most preferred criteria that
is considered by the customers
Particulars
Respondent
s
% of
respondents
Concept of
restaurant 3 12%
Quality of
food 8 32%
Service 2 8%
Pricing 3 12%
Convenience 4 16%
Ambiance 5 20%
Total 25 100%

Concept of restaurant
Quality of food
Service
Pricing
Convenience
Ambiance
0%
5%
10%
15%
20%
25%
30%
35%
% of respondents
% of respondents
Interpretation: In survey, it has assessed that 32% respondents said that food quality
is the main focus of them while making selection of restaurant unit. On the other side, 16%
supports convenience and 20% respondents give more priority to ambiance. Hence,
considering all such aspects it is suggested to Murano to provide customers with fresh, high
quality and unique food dishes.
2.2 Assessing mean, mode and median from secondary data set
Sales and profit figure of Murano pertaining to 10 years period is as follows:
Year
Sales (in
£)
Profit (in
£)
2008 980 160
2009 1150 230
2010 1280 320
2011 1220 270
2012 1370 340
2013 1545 410
2014 1685 550
2015 1790 640
2016 1910 780
2017 2050 890
Sales
(in £)
Profit
(in £)

Mean 1498 459
Standard Error 111.928 77.6953
Median 1457.5 375
Mode #N/A #N/A
Range 1070 730
Minimum 980 160
Maximum 2050 890
Sum 14980 4590
Count 10 10
Interpretation: Descriptive statistics mentioned above shows that average sales and
margin of Murano implies for £1498 & 459 respectively. Along with this, 50% revenue and
margin generated during the period of 10 years accounts for £1457.5 & £375 significantly.
Along with this, maximum revenue pertaining to this period is £2050, whereas minimum
value accounts for £980. To enhance and maintain sales revenue firm needs to focus on
placing advertisement on social sites which in turn helps in influencing the dinning decision
of more customers (Petala and et.al., 2017). Further, significant difference takes place in the
figure of mean and median profit margin. Thus, for increasing profit owner of Murano needs
to make focus on undertaking modern budgeting techniques.
2.3 Analyzing data set through using measures of dispersion
Dispersion measures mainly include standard deviation which in turn helps in
assessing the extent to which data set will deviate from the mean value (Khound and
Bhattacharyya, 2017). Table depicted below presents that standard deviation of sales and
profit was £353.94 & £245.69 respectively. Hence, comparatively sales, mean value of profit
will deviate from higher value so owner of Murano needs to make focus on undertaking tools
and techniques of budgetary control. This in turn helps in assessing deviations and taking
corrective measure for improvement within the suitable time frame.
Sales
(in £)
Profit
(in £)
Standard
Deviation 353.948 245.694
Sample Variance 125279 60365.6
Kurtosis -1.206 -0.8136
Skewness 0.171 0.65404

2.4 Quartile, percentile and correlation co-efficient
Computation of quartile
Particulars Sales (in £) Profit (in £)
1st quartile 1235 282.5
2nd quartile 1458 375
3rd quartile 1764 618
Percentile
Particulars 25th Percentile 50th Percentile 75th Percentile
Sales 1235 1458 1764
Profit 283 375 618
Interpretation: Statistical evaluation presents that from 1st quartile to the third one
both sales and margin of the restaurant unit are continuously increased. In first quarter sales
was £1235, whereas in third quarter sales revenue implies for £1764 respectively. Further,
profit margin also inclined from £283 to £618 at the end of third quarter. Thus, such pattern
or output shows that performance of the company is good in financial terms.
Correlation co-efficient
Sales Profit
Sales 1 0.98
Profit 0.98 1
Interpretation: Tabular presentation shows that sales and profit variable is highly
correlated with .98. It shows that, both the variables have significant impact on each other
and will move in similar direction (Dunn and Kenny, 2017). In other words, it can be
presented that for the generation of higher margin, Murano needs to take strategic measure or
action such as promotional plans for enhancing sales revenue.

TASK 2
3.1 Graphical presentation
It implies for the visual presentation of data set and helps in understanding data set or
statistical results in the best possible way (Uyar, Gungormus and Kuzey, 2017). Graphical
presentation facilitates better understanding so it is considered as high effectual as compared
to the tabular presentation. Graphical presentation of sales and profit data set
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
500
1000
1500
2000
2500
Sales (in £)
Profit (in £)
Interpretation: By doing analysis of secondary data set, it has found that sales
revenue of Murano increased from £980 to £2050 at the end of 2017. Along with this, profit
margin of the restaurant unit also inclined over the years to a great extent. Hence, increasing
sales pattern entail that customer base of restaurant unit is good. Further, higher sales indicate
that customers give more preference to the dinning services which are offered by Murano.
Along with this, profitability trend exhibits that such restaurant unit has made effectual
control on expenses. Thus, it can be depicted that financial performance of Murano is good in
terms of revenue and margin.
3.2 Creating trend line for forecasting future trends
Trend line: It shows direction or pattern on the basis of which specific data set will
move in the near future. Such statistical tool helps business entity or analyst in understanding
or evaluating future trends (Trend Line, 2017). On the basis of sales and profit figure of
Murano following trend line is drawn:

2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
500
1000
1500
2000
2500
f(x) = 115.575757575758 x + 862.333333333333
f(x) = 78.3636363636364 x + 28
Sales (in £)
Linear (Sales (in £))
Profit (in £)
Linear (Profit (in £))
Interpretation: The above depicted trend line shows increasing pattern in both the
variables considered for the evaluation. It is a positive indicator which in turn shows that by
establishing another unit in London owner of Murano will get positive results. Thus, to
achieve the same results business entity needs to lay more focus on promotional aspects
which in turn helps in attracting more customers and enhancing revenue. Further, such
restaurant unit also needs to exert control on expenses for generating suitable and higher
margin.
3.3 Preparing business presentation
Enclosed in PPT.
3.4 Formal business report
To
Management team
Murano Restaurant
Date: 24th December 2017
Subject: Market and financial assessment for second restaurant in London
Introduction: For understanding the preferences of customers regarding product, prices,
promotion and location aspect research has been carried out. Such report presents
methodology applied and findings derived from evaluation. Hence, report entails the extent to
which plan in relation to opening second restaurant in London is viable.
Methodology: In order to get information about potential market or trends both primary and
secondary data assessment has been done. By doing online survey on 25 respondents

primary data has been collected. Further, using financial record and scholarly articles
secondary data evaluation has been performed. Both statistical as well as thematic perception
test technique has been undertaken to analyze data set in an effectual way.
Findings: It has found from statistical analysis that sales and profit margin of the firm is
continuously increasing. Further, trend line also presents upward movement in the variables
such as sales and profit margin. It also has been assessed from primary evaluation that
customers are highly satisfied from the offering of Murano. Thus, it can be depicted that
Murano will attain success by opening another restaurant unit in London.
Conclusion & Recommendation: It can be concluded that customers give better rating to the
services of Murano. It shows positive attitude and high level of satisfaction of them towards
the dinning services of Murano. By taking into account all the aspects it is suggested to
Murano that make focus on innovative aspects. Through this, entrepreneur would become
able to attract more customers and maximizes revenue.
Sincerely
Research Analyst
TASK 3
4.1 Stating the use of information processing tools in the decision making aspects
There is several information processing tools that can be undertaken by Murano such as:
 Management information system (MIS): It supports managerial decision making to a
great extent by processing large data through intelligent devices.
 Transaction processing system (TPS): Such information processing system provides
high level of assistance in recording, summarizing as well as evaluating business
transactions and thereby aid in decision making (Jepsen and et.al., 2017).
 Decision support system (DPS): This system provides high level of assistance to
business entity in making selection of best alternative out of several available option
and thereby helps in attaining success (Zakane and et.al., 2017).
4.2 Determination of critical on the basis of business plan
Project plan
S. No Activities Duration Predecessors

1 Establishment of new
restaurant in London
2 Preparing brief proposal
or plan 3 days
3 Selecting research
methodologies 4 days 2
4 Collection of primary
data via survey 7 days 3
5 Secondary data collection 5 days 2
6 Data analysis for
selection suitable location
and layout for restaurant
6 days 4,5
7 Selection of suitable
location 2 days 6
8 Budget formulation 3 days 6
9 Arranging infrastructure 12 days 7,8
10 Recruiting staff 5 days 7
11 Organizing training 2 days 10
12 Sourcing supplier 5 days 8
13 Opening new restaurant 1 day 12
Critical path: 2 + 3 + 4 + 6 + 7 + 10 + 11
= 3 + 4 + 7 +6 + 2 + 5 + 2
= 29 days

4.3 Use of investment appraisal tools in evaluating the viability of proposal
Investment appraisal techniques include payback period, NPV and IRR which in turn
provides high level of assistance to the business entity in deciding whether long term
investment project is viable or not (Investment appraisal techniques, 2017). On the basis of
cited case situation, entrepreneur of restaurant unit has proposal pertaining to second
restaurant with the initial investment of £190000. In this, to evaluate the attractiveness or
viability of project in financial terms NPV and IRR technique is applied.
Net present value
Year
Cash flows
(in £)
Present value
factor @ 12%
Cash flows *
discounting
value
1 50000 .893 44642.86
2 64000 .797 51020.41
3 58000 .712 41283.25
4 70000 .635 44486.27
Total
discounted
cash inflow
(TDCF)
181432.8
Less: Initial
investment (II)
190000
NPV (TDCF -
II)
-8567.22
Internal rate of return
Year
Cash flows
(in £)
Initial
investment
(190000)
1 50000
2 64000
3 58000

4 70000
IRR 10%
Interpretation: Referring the outcome of investment appraisal, it is advised to the
owner of Murano to does not consider or invest money in the concerned proposal. Moreover,
NPV pertaining to such proposal implies for £8567.22 respectively. Further, IRR of such
project is 10% that considered as highly lower as compared to the standard criteria. Hence,
overall evaluation presents that such investment project will not offer suitable returns to the
entrepreneur. Thus, there is a requirement to make focus on finding other profitable proposal.
CONCLUSION
In conclusion to this report, it can be concluded that customers of Murano have
positive attitude towards the dinning services offered by it. Besides this, from secondary
evaluation, it can be inferred that sales and margin of the concerned restaurant unit will
increase in the near future. It can be summarized from the report that statistical tools are
highly prominent and help in presenting valuable information from large data set for the
purpose of decision making. Along with this, it has been articulated that information
processing tools such as MIS, DSS and TPS helps manager in taking appropriate decision. It
can be seen in the report that NPV associated with the concerned proposal is negative.
Further, IRR accounts for 10% so it can be stated that proposed investment plan will not aid
in the profitability aspect of Murano. Thus, for getting desired level outcome or success firm
should make focus on other alternative proposal or plan.

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Online