Assessing Investment Appraisal and Factors in Decision Making

Business Decision Making

TABLE OF CONTENTS
Assessing how investment appraisal and financial as well as non-financial factors aid in
decision making...........................................................................................................................3
REFERENCES................................................................................................................................7

Assessing how investment appraisal and financial as well as non-financial factors aid in decision
making
Business decision making is the process of selecting the best course of action out of
several alternatives available. At the time of decision making, manager is required to consider
business goals and objectives so that competitive advantage can be gained. This assignment is
based on the case scenario of XYZ Plc which offers customers with luxurious accommodation
services. As per the scenario, company offers services in UK and other parts of Europe as well.
Now, with the motive to take competitive advantage firm is planning to invest money in the two
proposed projects such as software and laundrette. However, company is facing issues in
identifying the project which maximizes both organization’s productivity and profitability.
In order to resolve project selection issue, manager of XYZ Plc is undertaking
investment appraisal tools or methods. Payback method, NPV, ARR and IRR are recognized as
the most effectual methods which helps company in determining the level to which specific
project is good in financial terms. The rationale behind this, investment appraisal tools helps in
identifying and evaluating the attractiveness of capital project. Thus, by evaluating financial
viability manager of XYZ Plc can take appropriate decision in relation to the selection or
rejection of project.
Payback period provides deeper insight about the length of time which business unit will
take for attaining break-even level. Hence, it entails time within which firm will recoup amount
expended at initial level. Referring this aspect, firm can do further planning about profitability
and other aspects (Häcker and Ernst, 2017). On the critical note, this method offers results for
decision making without taking into account time value of money concept which in turn has
greater importance in the present times.
Further, NPV method highlights profitability associated with proposed investment plan
and thereby helps in making selection of appropriate project. Moreover, by considering time
value of money concept it presents difference between present value of cash inflows and
outflows (Shaffie and Jaaman, 2016). Thus, business unit should select project which has higher
NPV over other proposals available.