Business Decision Making - X Plc

Running head: BUSINESS DECISION MAKING
Business decision making
Name of the student
Name of the university
Student ID
Author note

BUSINESS DECISION MAKING1
Introduction
X plc that is engaged in dealing with vehicle parts conduct its business in parts of
Europe and UK. At present the management of the entity is looking for investing in the new
business and selected 2 projects to continue with one among those. The task will evaluate 2
projects with various investment appraisal techniques such as payback period and net present
value. Based on the outcomes the task will recommend the best one to be considered for
investment (Brailsford, Churilov and Dangerfield 2014).
1. Calculation of payback period
Project A
Calculation –
Year Cash flow Cumulative cash flow
0 -£ 20,000.00 -£ 20,000.00
1 £ 8,000.00 -£ 12,000.00
2 £ 10,000.00 -£ 2,000.00
3 £ 12,000.00 £ 10,000.00
4 £ 15,000.00 £ 25,000.00
5 £ 19,000.00 £ 44,000.00
Payback period in years =2+(ABS(D15)/C16)

BUSINESS DECISION MAKING2
Payback period = 2+(ABS(2000)/12000) = 2.17 years
Project B
Calculation has been made as follows –
Year Cash flow Cumulative cash flow
0 -£ 30,000.00 -£ 30,000.00
1 £ 10,000.00 -£ 20,000.00
2 £ 15,000.00 -£ 5,000.00
3 £ 17,000.00 £ 12,000.00
4 £ 19,000.00 £ 31,000.00
5 £ 20,000.00 £ 51,000.00
Payback period in years =2+(ABS(D34)/C35)
Payback period = 2+(ABS(5000)/17000) = 2.29 years
2. Computation of NPV
Project A