Business Decision Making: Investment Appraisal Techniques

Business Decisions Making

TABLE OF CONTENTS
REFERENCES...........................................................................................................................7

Business decision making is the integral part of every business and without it business
cannot survive. The decision is mainly in respect to the investment, product expansion and
business expansion. This essay presents about the investment appraisal technique that can be
used by XYZ plc for taking decisions in respect to investments.
The net present value and payback period is used for evaluating the profitability and
feasibility of the project A and project B.
Net present value
Net present value is the capital budgeting technique which is used for determining the
profitability of the business proposal (Stretcher, Funck and Johnson, 2017). It determined by
subtracting present value of cash inflow and present value of cash outflow. The positive NPV
indicates that the investment can be done by the company as it is profitable.
Project A
Computation of NPV
Year Cash inflows
PV factor
@ 11%
Discounted
cash
inflows
1 28000 0.901 25225.2
2 32000 0.812 25972
3 35000 0.731 25592
4 55000 0.659 36230
5 78000 0.593 46289
Total discounted cash
inflow 159308
Initial investment 100000
NPV (Total
discounted cash
inflows - initial
investment) 59308
Project B
Computation of NPV
Year Cash PV factor Discounted