Evaluating Project Viability

This assignment discusses the analysis of two projects, Project A and Project B, for Excel Ltd. The Internal Rate of Return (IRR) is used to determine the viability of each project. IRR indicates the actual return that a project can earn on invested amount. Higher the IRR percentage, more project is considered viable. In this case, Project A has an IRR of 46%, which is greater than Project B's IRR of 43%. Therefore, Project A is considered more viable than Project B for Excel Ltd.

BUSINESS DECISION
MAKING

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Plan for doing primary research........................................................................................3
1.2 Sampling techniques..........................................................................................................4
1.3 Questionnaire for research.................................................................................................4
TASK 2............................................................................................................................................6
2.1 Information for decision making............................................................................................6
Table 1Calculation of mean, median and mode...........................................................................6
2.2 Analysis of data using statistical tools...................................................................................6
2.3 Calculation of standard deviation..........................................................................................7
2.4 Calculation of quartile, percentile and correlation.................................................................7
TASK 3............................................................................................................................................9
3.1 Graphs on data collected from primary research...................................................................9
3.2 Trend line.............................................................................................................................13
3.3 Covered in PPT....................................................................................................................13
3.4 Formal business report.........................................................................................................13
TASK4...........................................................................................................................................14
4.1 Information processing tools................................................................................................14
4.2 Project evaluation techniques...............................................................................................15
4,3 Use of financial tools for decision making..........................................................................17
CONCLUSION..............................................................................................................................18
RFEFRENCES..............................................................................................................................20

INTRODUCTION
In today business environment it is very difficult to take decisions. In such a situation
analysis of facts gives a specific direction to the manager in relation to decisions making. In
respect to this, statistical tools are widely used by the managers. In this report an attempt is made
to apply statistical tools on the firm cash flows. Along with these results of statistical tools like
mean, median, mode, quartile and correlation are also interpreted in the report. Projects play a
vital role in growth of an organization. Without these projects it is not possible to survive in a
highly competitive market. There are many techniques of project appraisal like payback period,
ARR, IRR and NPV and all these four techniques are widely used in the business firms. In this
report an attempt is made to create broad understanding about application of these tools on the
firm cash flows. After calculation results are also interpreted in the report. It is necessary to
complete project on time. In this regard PERT and CPM technique is used by the firms. In this
report network diagram is prepared and interpreted in detail. In this way entire project is
completed by the researcher.
TASK 1
1.1 Plan for doing primary research
Primary research refers to collection of data that is not collected by any one. Whereas,
secondary data is a data that is already collected by someone. Primary data can be collected by
conducting surveys. On other hand, secondary data can be collected through books, journals,
newspapers etc. So data collection method is different in both primary and secondary sources of
data collection. In research it is necessary to collect both primary and secondary data (Dan, ,
2006). By collecting and analyzing secondary data researcher comes to know about past
scenario. If researcher wants to know about consumer behavior of the people regarding juice.
Then he will collect secondary data and by analyzing that data he will come to know about
consumer behavior of the people in previous days. On the basis of input researcher will draft a
questionnaire. Hence, secondary data play a supportive role in collection of primary data
(Thomas and Harden, 2008). In order to collect data respondents will be taken from London.
Sample size for research will be 50 people. In respect to this entire city will be divided in to
several parts. Hence, entire sample size will be divided in to these areas. In this way data will be
collected from several areas and data collected will be reliable in nature. So this plan will be
followed in order to collect data for primary research.

1.2 Sampling techniques
In order to collect sample size is determined but in order to collect data in proper manner a
researcher needs to determine the way in which sample will be taken from the population. In this
regard sampling techniques are used by the researcher. Some of the commonly used sampling
techniques are given below.
 Simple random sampling – Under this technique samples are randomly collected
from population. If this technique is applied in research then all samples in London
will be taken randomly from its entire population (Lieth and Whittaker, 2012).
 Cluster sampling- In this technique entire population is divided in to several parts.
From these parts unit of sample is taken. This method of sampling is quite popular
among researchers because in this method wide geographic area is covered and data
is collected from different people. Hence, data collected by applying stratified
sampling technique has high reliability. For research this sampling technique will be
used.
 Convenience sampling- In this sampling technique samples are taken according to
convenience from population. However, this technique is rarely used by the
researchers. This is because main target of every researcher is to collect reliable data.
So they do not look after their convenience (Whittemore and Knafl, 2005). Due to
this reason there is less chance of using this sampling technique.
 Stratified sampling- In such kind of technique population is break in to several parts
and strata are formed. Strata are a group of people sharing common attributes. This
technique is widely used by the researchers in order to cover people with different
attributes in research.
1.3 Questionnaire for research
Name
Age
Marital status
 Married
 Unmarried
 Widow
Do you consume juice?

 Yes
 No
In a month how many times you consume juice?
 1-3 times
 4-6 times
 7-9 times
 10-14 times
Your consumption of juice increased, decline or remain stable?
 Increase
 Decline
 Stable
You consume health juice or fruit juice
 Health juice
 Fruit juice
 Both
Why you consume fruit juice?
 For taste
 For health
Why you consume health juice?
 For taste
 For health
In future consumption of health juice will increase.
 Agree
 Highly agree
 Somewhat agree
 Disagree
 Highly disagree
TASK 2
2.1 Information for decision making
Table 1Calculation of mean, median and mode
Year Cash flow

1 10000
2 12000
3 13000
4 16000
5 19000
Mean 14000
Median 13000
Mode #N/A
Mean – Mean indicates the average value of the specific variable. It indicates average
performance of specific variable. If value is above mean in case of sales then it indicates the firm
is giving positive performance. Even sales is declining but is above average value then there is a
little matter of concern (De La Cal and Cárcamo, 2006). But if sales fall below average then it
indicates that situation is danger and immediate actions are required to break continuation in this
trend.
Median- Median indicates the medium value in the data set. It divides entire data in to
two parts. There may be different trend in both data sets. By using this statistical tool such trend
comes in attention to analyst. Hence, this statistical tool is widely used by experts.
Mode- Mode indicates values that are repeated. Value of mode indicates that trend is
repeated. This statistical tool can used to identify pattern of pricing of shares (Miller and Miller,
2005). Due to this specific feature mode is widely used by the experts.
2.2 Analysis of data using statistical tools
Mean- Excel ltd mean value is 14,000 and its cash flow value in last year is 19,000. This
means that cash flow in last year is above average value. This indicates that company give good
performance. Moreover by looking at the trend it can be seen that cash flows of Excel ltd are
increasing steadily. This indicates that firm gives fabulous performance.
Median- Median value data of Excel ltd in to two parts and in both parts trend is different.
This can be seen from below table.
Table 2: Percentage change in cash flows
Year Cash flow Percentage change
1 10000
2 12000 20%
3 13000 8%
4 16000 23%
5 19000 19%

Median value is 13,000 and first part comprises first to third year. On other hand, second
part cover fourth and fifth year. In first part declining trend is observed and same trend is
observed in second part. But in fifth year growth rate of cash flow is greater than third year.
Mode- Value of mode is zero and this reflects that none of cash value is repetitive in nature
(Mean, meidan, mode and range. 2015).
2.3 Calculation of standard deviation
Table 3 Calculation of standard deviation
Year Cash flow
1 10000
2 12000
3 13000
4 16000
5 19000
Standard deviation 3535.534
Interpretation
This statistical tool is widely used by the analysts for data analysis. This tool helps in
measuring the performance of the specific variable (Goswami, 2006). Standard deviation
indicates the deviation in values from mean value. Standard deviation of Excel ltd is 3535.534
means that cash flow of last year is above mean value. This indicates that company is giving
good performance.
2.4 Calculation of quartile, percentile and correlation
Table 4 Calculation of quartiles
Year Cash flow
1 10000
2 12000
3 13000
4 16000
5 19000
Q1 12000
Q2 13000
Q3 16000
Table 5 Calculation of percentiles
Year Cash flow
1 10000
2 12000
3 13000

4 16000
5 19000
P1 12000
P2 13000
P3 16000
Interpretation
Quartiles and percentiles- Quartile and percentile both are same thing and way of
calculation is different in both cases. Like median in case of quartile and percentile entire data is
divided in to four parts and analysis of data indicates continue increase in cash flow (Burgstahler
and Eames, 2006). So it can be said that Excel ltd give a good performance.
Table 6 Calculation of correlation
Year Sales Cash flow
1 1000 10000
2 1200 12000
3 1300 13000
4 1600 16000
5 1900 19000
Correlation 1
Interpretation
It is a statistical tool that helps in identifying relationship between two variables. Correlation
may be positive or negative. Positive correlation indicate that two variables are moving in the
same direction .Whereas, negative correlation indicate that if one variable moves upward then
other variable will go in downside direction (Cummins, 2013). Correlation is one and this
reflects that there is a perfect correlation between both variables. This means that the extent
which sales will change same change will be observed in cash flow.
TASK 3
3.1 Graphs on data collected from primary research
Do you consume juice?
Yes 45
No 5

Table 7 Do you consume juice
Interpretation
From table it can be seen that most of the respondents admit that they consume juice. Out
of 50 respondents 45 says that they consume juice. While, only 5 respondents state that they do
not consume juice. This means that majority of people like to consume juice.
In a month how many times you consume fruit juice?
1-3 times 30
4-7 times 10
7-9 times 3
10-14 times 2
Table 8 In a month how many times you consume fruit juice

Interpretation
Majority of people accept that in a month they consume juice 1-3 times. While ten
respondents admit that they consume juice from 4-7 times in a month. In further research it has
been find out that only 3 and 2 respondents consume juice in a 7-9 and 10-14 times in a month.
Hence, it can be said that majority of respondents consume juice 1-3 times in a month.
Your consumption for fruit juice increase, decline or remain stable
Increase 30
Decline 5
Stable 10
Table 9 your consumption of fruit juice increase, decrease or remain stable
Interpretation
In order to measure increase of decrease in consumption of fruit juice this question was
asked to respondents. 30 people accept that their frequency of consumption of fruit juice gets
increased. While only 5 respondents said that their frequency of consumption of juice gets
declined. On other hand, 10 respondents admit that their consumption of fruit juice is stable. So,
it can be said that majority of people increase consumption of fruit juice.
In future consumption of health juice will increase.
Agree 10
Highly agree 15
Somewhat agree 5
Disagree 10
Highly disagree 5

Table 10 In future consumption of health juice will increase
Interpretation
In research an attempt is made to identify that in future health juice consumption will
increase or not. As per fact it is clear that majority of respondent’s thinks that consumption of
fruit juice will increase. In respect to this 10 are agree, 15 are strongly agree and 5 are somewhat
agree with this statement. On other hand, ten are disagreeing with this statement followed by 5
respondents that are highly disagreeing with this statement. So, it can be said that majority of
respondents thinks that consumption of fruit juice will increase.

3.2 Trend line
Table 11Trend line
Interpretation
From chart it is clear that in upcoming years sales will increase. This is also evident from
results of primary research in which it is find out that people frequency of consumption of juice
is increased. Moreover, there is a lot of scope for increase in sales of health juice. Hence,
increase in tend line is supported by the results of research. Currently, many diseases are
spreading very quickly and now people are more conscious about their health. In order to remain
healthy people are making every effort. People awareness about health and their concern about
same will lead to traction in sales of juice. Hence, in upcoming years sales will certainly
increase.
3.3 Covered in PPT
3.4 Formal business report
To
The board of directors of Excel ltd
Date- 26-11-2015
Introduction
Company wants to enter in to new business and it wants to know viability of project. In respect
to this detail research is carried out on the people consumer behavior. There are two kinds of
drinks namely health and fruit juice. In research an attempt is made to find out the future trends

of health juice. In this regard questions are put up in questionnaire and sample size is taken up to
certain number in order to ensure that data collected will be reliable in nature.
Work
In order to conduct research primary data is collected by the researcher. The main aim of Excel
ltd is to open business in London. Hence, sample units are taken from London. In this regard
entire population is divided kin to several parts. Sample units for research are taken from various
parts of mentioned city. In research 50 respondents are covered that reside in different borough
of London. In research lots of question was asked to them in order to measure market potential.
In respect to this findings are presented below.
Findings
In research it has been find out that most of the people are consuming juice. As a result, it is
expected that in future also sales of juice will increase. In research fact comes in light that in
future also demand for juice will increase. A strong positive reaction of respondents is observed
in case of health juice. As per their response it is clear that in future also demand for fruit juice
will increase specially in case of health juice.
Recommendations
On the basis of findings it is recommended to the company board of directors that business must
be start in this field. As there is a lot of scope of growth in business. Hence, commencement of
juice business will be profitable.
TASK4
4.1 Information processing tools
In today era, information technology is widely used by the business firms for improving
their business performance and to simplify complex operations. There are many information
processing tools that are gaining wide acceptability among business firms. Some of the
information processing tools that are used by the business firms are follows. Management information system- Management information system is used at the middle
level management. In this information system lots of information can be stored and
processed. By doing processing of information complex data can be presented in a simple
manner. This information system is commonly used by the middle level managers for
making day to day complex business decisions (Chang, 2005). Due to its specific feature
this information system gain wide acceptability among business firms.

 Decision support system- In today business environment situation changed at a rapid
pace. In such a situation competitors make changes in their strategy. This make situation
more complex. In such a situation it is very difficult to make a decision. This information
system in such a situation helps an organization in making sound decisions. Decision
information system is basically used by the top level managers who formulate a strategy
for an organization. In such an information system simulation facility is available which
is used to simulate a situation. By applying inputs in the simulated situation it is checked
that strategy that management formulated will be successful or not. Hence, this
information system provides a lot of support to the top management.
 Transaction processing system- In an organization several trade activities are performed
which lead to origination of transactions. In this information system information
regarding all transactions is entered (Kajiwara, 2005). Moreover, systematic report is
also prepared on the basis of data related to the business transactions. Hence, this
information system is used by the lower level managers in order to continue keep an eye
on the company transactions.
4.2 Project evaluation techniques
Table 12 Data of project

Table 13 GANTT chart
Table 14 Network diagram
Interpretation
Project evaluation techniques are applied by the project managers in order to identify the
pattern in which project will be performed (Trietsch and Baker, 2012). Moreover, this technique
is also used to determine the time period with in which each and every sub activity of the project
must be completed. Above critical path diagram is attached and it indicate the pattern in which

project must be performed. From diagram it can be said that project of Excel ltd will be
completed in a 20 days.
1+2+4+3+5+2+3= 20 days
4,3 Use of financial tools for decision making
Table 15 Calculation of payback period
Payback period Project A -55000 Project B -60000
1 22800 -32200 25000 -35000
2 27360 -4840 30000 -5000
3 32832 27992 34000 29000
4 39398 67390 37000 66000
5 47278 114668 44000 110000
Interpretation
Payback period indicate the time period with in which project can recover its investment
value. From table it can be seen that both projects will recover investment in two years. Hence,
on the basis of this parameter none of project can be considered viable. The main benefit of this
technique is that it can be applied by anyone and no technical knowhow is required to apply this
method. The main limitation of this method is that in this technique present value concept is not
used (Srivannaboon and Milosevic, 2006). As a result it does not compute present value of the
cash flows. Due to easy way of calculation this method is quite popular among business firms.
Table 16 Calculation of ARR
Project A Project B
1 22800 25000
2 27360 30000
3 32832 34000
4 39398 37000
5 47278 44000
Average 33933.7 34000
ARR 62% 57%
Interpretation
ARR indicates the average return that a project can earn on the invested amount. ARR of
project A is 62% which means that this project can earn average return of mentioned percentage
on project. On other hand, ARR of project B indicate that this project can earn average return of
57% on project. On the basis of this parameter it can be said that project A is more viable then
project B for Excel ltd.

Table 17 Calculation of NPV
NPV Project
A
10% discount
rate
Present
value
Project
B
10% discount
rate
Present
value
1 22800 0.909 20725.2 25000 0.909 22725
2 27360 0.826 22599.36 30000 0.826 24780
3 32832 0.751 24656.83 34000 0.751 25534
4 39398 0.683 26909.11 37000 0.683 25271
5 47278 0.621 29359.69 44000 0.621 27324
Total 124250.2 125634
Initial
investment
55000 60000
NPV 69250.19 65634
Interpretation
NPV indicate the return that a project can earn after deducting initial investment from
present value of the cash flows. NPV of project A is higher than project B. So, project A is
considered more viable then project B. NPV removes weakness of payback period method
because in this technique concept of present value is used to compute present value of the cash
flows (Kerzner, 2013). Hence, this method indicates the present value of the project on current
date.
IRR (Internal rate of return)
Table 18 Calculation of IRR
Year Project A Project B
-55000 -60000
1 22800 25000
2 27360 30000
3 32832 34000
4 39398.40 37000
5 47278.08 44000
46% 43%
Interpretation
IRR indicate the actual return that project can earn on the invested amount. Higher the
IRR percentage more project is considered viable. IRR of project A is 46% which is greater than
project B IRR 43%. Hence, project A is considered more viable then project B for Excel ltd.
CONCLUSION
On the basis of above discussion it is concluded that by analyzing facts ample
opportunities that are available in the market can be easily identified. In order to identify

opportunity data analysis is required. This can be done by applying statistical tools on the facts.
Selection of right project is necessary for an organization. Manager merely by looking at figures
cannot consider any project profitable. Hence, in this case application of investment analysis
technique is required. By applying these techniques a suitable project can be selected by the
managers for an organization. Network diagram is an important tool that indicates the way in
which project can be completed. Hence, this diagram must be followed in order to ensure that
project will be completed on time and in systematic way.

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