Business Decisions Making

Business Decisions
Making

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Calculate payback period.........................................................................................................1
2. Calculate Net Present Value (NPV)........................................................................................1
3. Analysis...................................................................................................................................2
CONCLUSION................................................................................................................................4
References........................................................................................................................................5

INTRODUCTION
Decision making process in enterprise is a step by-step procedure that helps experts to
overcome challenges by assessing facts, evaluating solutions, and selecting a direction from there
(Ball, 2013). This specified method often offers a chance, at the end to see if the determination
was the correct one. This essay based on XYZ Plc which is looking to invest in new software or
in laundrette project where they have two different proposals. So managers have to made
decisions to select any best project which provide them more benefits. This assessment covers
the calculation of NPV or payback period and what are the benefits and drawbacks of it.
MAIN BODY
1. Calculate payback period
Year Project A Cumulative
cash flow
Project B Cumulativ
e cash flow
0 100000 - 120000 -
1 28000 28000 31000 31000
2 32000 60000 38000 69000
3 35000 95000 43000 112000
4 55000 150000 64000 176000
5 78000 228000 89000 265000
Formula:
Payback period: Year before full recovery + unrecoverable cost / cash flow during the year
Project A = 3 + 5000 / 55000
= 3 + 0.90
= 3.90 year
Project B = 4 + 56000 / 64000
= 4 +0.87
= 4.87
2. Calculate Net Present Value (NPV)
Year Software Project PV @ 11% DCF
0 -100000 1 -100000
1