Business DecisionMaking

Business Decision-
Making

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Calculation of payback period.................................................................................................1
2. Calculation of NPV..................................................................................................................2
3. Analysis....................................................................................................................................2
4. Practical implications...............................................................................................................3
CONCLUSION................................................................................................................................4
REFRENCES...................................................................................................................................5

INTRODUCTION
Decision-making process in an enterprise refers to the process of making choices by
identification of a decision, information gathering and assessment of alternative resolutions. It is
a process which managers have to use in order to achieve the goals and objectives of the
organisation (Al-shami, Razali and Rashid, 2018). ABC Plc. is a computer software company
which is looking to invest in a new business and has found two new business opportunities which
are Motor software project or Hardware project. This essay includes the calculation of payback
period and NPV which will help the firm to identify the project which is more suitable for
investment point of view of the company.
MAIN BODY
1. Calculation of payback period
Formula-
Payback period= Year before full recovery+ Unrecoverable cost at the beginning of the year
Motor software (A)= 3 + £4000/£20000
= 3+ 0.2
= 3.2 years
Hardware(B) = 3+ £5000/£30000
= 3+ 0.16
= 3.16 years
From the above calculations it can be observed that ABC Plc. has an option of investing
its funds in two projects but in calculation of payback period it has been found that there is not
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