Business Project Evaluation and Selection

This assignment delves into the process of identifying and solving business problems. It emphasizes the importance of project selection based on Net Present Value (NPV) and Internal Rate of Return (IRR). The document highlights the use of network diagrams for effective project management, ensuring timely completion and cost optimization.

BUSINESS DECISION MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Plan for collection of data......................................................................................................4
1.2 Survey methodology and sampling frame for the research...................................................4
1.3 Questionnaire for present study.............................................................................................5
TASK 2............................................................................................................................................6
2.1 Information for decision making...........................................................................................6
2.2 Analysis of descriptive statistics............................................................................................7
2.3 Measures of dispersion..........................................................................................................8
2.4 Quartile, percentile and correlation coefficient.....................................................................8
TASK 3............................................................................................................................................9
3.1 Analysis of graphs and charts................................................................................................9
3.2 Trend line.............................................................................................................................10
3.3 Covered in PPT....................................................................................................................11
3.4 Formal business report.........................................................................................................11
TASK 4..........................................................................................................................................12
4.1 Information processing tools...............................................................................................12
4.2 Network diagram.................................................................................................................13
4.3 Project evaluation................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
Table 1 Calculation of mean, median and mode.............................................................................6
Table 2 Percentage change in sales.................................................................................................8
Table 3Calculation of standard deviation........................................................................................8
Table 4 Computation of quartile and correlation.............................................................................8
Table 5Calcualtion of IRR...........................................................................................................................15
Figure 1People response on the price of tourist package of the Thomas cook..............................10

Figure 2People comments on question that is asked about adequacy of services provided by the
Thomas cook..................................................................................................................................11
Figure 3Trend analysis chart.........................................................................................................12
Figure 4 GANTT chart..................................................................................................................15
Figure 5Network diagram..............................................................................................................15

INTRODUCTION
Thomas cook is the one of the largest company that is operating in the travel and tourism
industry. In the present study, different statistical tools like standard deviation and correlation are
applied on the cash flows and interpretation of same are made. In the middle part of the report,
formal business report is prepared and recommendations are made. At end of the report, network
diagram is prepared and project evaluation methods are applied on cash flows.
TASK 1
1.1 Plan for collection of data
There are two sort of business decisions that are taken by the managers in their day to day
business practice. These decisions are usually classified in two categories namely short and long
term business decisions. Sometimes business firms face a problems which remain in existence
for the long time period. Hence, it become very important to solve that problem at initial stage.
In order to do this usually business firms conduct research under which two sort of data are
gathered by the relevant person (Gaile and Willmott, 2013). These two type of data are primary
and secondary. Both are gathered by the researchers in order to ensure that better solution of the
business problem will be identified and solved. In the present research also primary and
secondary data will be collected. Currently, Thomas cook is facing loss in its business and it is
very important for it to understand the customer preference and buyer behavior. In this regard
various literatures will be reviewed as part of secondary research in order to develop broad
understanding about the market. Trends keeps on changing consistently with passage of the time
period. Hence, it is very important to identify things that are currently going on in the market
(Gal, Stewart and Hanne, 2013). Thus, primary data will also be collected by distributing
questionnaire among the respondents. In order to conduct present research sample of 60
respondents will be taken by the researcher from the population of the London. In this way
research will be conducted.
1.2 Survey methodology and sampling frame for the research
As part of survey methodology questionnaire will be distributed among the 60 respondents
that resides in the London. Exploratory research design will be used in the present study
sampling frames that can be used in the present study are explained below.

 Simple random sampling: Simple random sampling the method under which on the basis of
will and without taken in to account any factor sample units are picked up from the cartel of
people that resides in the specific geographic area (Hahn and Doganaksoy, 2011). Mentioned
method of sampling is often used by the researchers to do a research in which there is no
need to collect data from the specific type of people.
 Stratified sampling method: This is complicated and widely used sampling approach. This is
because in this method varied sort of individuals are taken as sample units from the cartel of
people. For the present study this sampling method is most appropriate. This is because main
aim of the present study is to identify the consumer behavior of the different sort of people.
Hence, stratified random sampling method is used in the present study,
 Cluster sampling: This approach of sampling is the variant of the method that is discussed
above. In this approach instead of using demographic features entire area is classified in
different domains (Kowalski,2013). From these divided areas sample units are taken by the
researcher. This method will not be used in the present study because it does not suit to
research requirement.
 Convenience sampling: In this approach as per as per comfort one take sample unit from the
population. This method is similar to the simple random sampling approach.
1.3 Questionnaire for present study
Name: ______________
Age: _________________
Income: _____________
Do you know about Thomas cook?
Yes ( )
No ( )
Tour packages of the Thomas cook are available at higher price.
Strongly agree ( )
Agree ( )
Neutral ( )
Disagree ( )

Highly disagree ( )
Do you think that services provided by the Thomas cook are adequate?
Yes ( )
No ( )
Which of the tourist places you like to visit?
Indian ( )
China ( )
UK` ( )
Thailand ( )
Which factors attract you towards the specific tourist place?
Low cost of living in the tourist destination ( )
Historical places ( )
Rich culture ( )
If tour operator will increase tour package cost then in that case what change will come in
demand from your side.
Very high ( )
Moderate ( )
Low ( )
Your suggestions in respect to improvement in service.
TASK 2
2.1 Information for decision making
There are wide variety of statistical tools that are used by the business firms. Some of them
are explained below.
Table 1 Calculation of mean, median and mode
1 9809

2 9491
3 9315
4 8588
5 7834
Mean 9007.4
Median 9315
Mode #N/A
Definitions
 Mean: It is the statistical tool which is used by almost all types of researchers in order to
evaluate the specific variable. Mean help an analyst in obtaining overview of the variable that
is analyzed by him (Huber, 2011). This is the reason due to which mean is mostly used by
the data scientists. On the basis of mean to some extent manager can make prediction about
likely changes that may takes place in the variable in upcoming time period.
 Median: This is another statistical tool which along with mean is used in order to analyze the
data in better way. It is frequently identified that data analyst have to analyze huge set of
data. It is not possible to understand the data in proper may merely by starring on same.
Median is the tool that is used to solve this problem. By using this tool entire set of figures is
divided in to various parts. Analysis of these separate set of figures is done in order to
analyze the data in better way.
 Mode: This tool is very popular among the data scientists because it help one in exploring the
values that are appearing in the groups of figures repeatedly. This tool is often used by the
financial analysts in order to identify the trend that are repeating many times in the specific
time period (Karlan and Valdivia, 2011). On the basis of identified trends financial analysts
make a prediction for the upcoming time period.
2.2 Analysis of descriptive statistics
Descriptive statistics are interpreted below.
Mean: It can be observed from the table that mean value of the sales of the Thomas cook is 9007
which is higher than the last value of the variable. This reflects that firm is giving poor
performance in its business. It can be said that firm failed to book even average sales in its
business. This indicate the condition of the business firm is very critical and it needs to take
action immediately in order to break the trend that is reflects by the data set. In order to solve this
problem Thomas cook can make available tourist package at very cheaper price to the customers.
By doing so revenue can be increased in the business.

Median: Median value of the variable sales is 9315. It is the value which is splitting entire set of
figures in the multiple parts. It can be observed from the table that firm failed to give strong
performance in its business.
Table 2 Percentage change in sales
1 9809
2 9491 -3%
3 9315 -2%
4 8588 -8%
5 7834 -9%
It can be observed from the table that sales of the firm is declining consistently. After median
value sales of the firm is declining at a very fast pace which is not good for the business. Hence,
firm needs to take strict actions in order to improve its performance.
Mode: None of value is repeating in set of data. Hence, value of mode is zero.
2.3 Measures of dispersion
Table 3Calculation of standard deviation
1 9809
2 9491
3 9315
4 8588
5 7834
STDEV 794.3257
Interpretation
Standard deviation reflects the extent to which values of the data set are moving away
from the mean value (Berlinet and Thomas-Agnan, 2011). Standard deviation of Thomas Cook
sales is 794 and it reflects that values of the sales is moderately deviating from mean value.
2.4 Quartile, percentile and correlation coefficient
Table 4 Computation of quartile and correlation
1 9809 -521
2 9491 -586
3 9315 -199

4 8588 -118
5 7834 23
Q1 8588
Q2 9315
Q3 9491
Correlation -0.88579
Interpretation
Quartile divide the set of values given above in the four parts (Hernández-Lerma and
Lasserre, 2012). It can be seen that there is a less gap between Q2 and Q3. Hence, firm sales are
not growing which is matter of concern for same. On other hand, value of correlation of sales
and profit is -0.88 which indicate that there is a negative relationship between both variables. In
case revenue will be enhanced by 20% then by same percentage profit will reduce.
TASK 3
3.1 Analysis of graphs and charts
Tour packages of the Thomas cook are available at higher price.
Figure 1People response on the price of tourist package of the Thomas cook
Interpretation
It can be seen from the chart that is given above that most of respondents 28 out of 60
think that strongly agree that packages are available at very high price at Thomas cook. 10
respondents are agree with the same statement. 7 respondents are neutral on same statement and
only 8 out of 60 are disagree and assumed that firm is providing tourist package at cheaper price.
7 respondents are highly disagree with the same statement. It can be said that most of
respondents think that firm is providing tour package at relative high price.

Do you think that services provided by the Thomas cook are adequate?
Figure 2People comments on question that is asked about adequacy of services provided by the
Thomas cook
Interpretation
It can be observed from the table that 50 out of 60 think that Thomas cook is providing
sufficient services to the customers. Only 10 respondents think that more services Thomas cook
needs to provide to the customers. Hence, in terms of service there is a positive perception of the
people about Thomas cook.
3.2 Trend line
It is used in business to anticipate or predict potential or future changes on the basis of
historical performance and trend. With reference to Thomas Cook, trend line is constructing here
to forecast potential movement in total turnover, presented below:

Figure 3Trend analysis chart
Interpretation:
Above trend line forecasted that declined movement in future years. Downward
movement of trend line outlined that in the upcoming years, Thomas Cook’s turnover will show
a falling trend indicating that company will perform poor in next year (Jacobsen and et.al.,
2010). Fall in consumer demand, tough competition, pricing pressure, changing customer
perception, attitude and buying preferences towards holiday packages may be the reasons behind
such volatile trend. Decline in turnover is a sign of lower performance in the forwarding years.
On the basis of it, it can be suggested to the managers to use various tactics and strategies like
quality products, attractive tour packages, pricing policy, discounting and others so as to attract
high number of customers to maximize sales revenues.
3.3 Covered in PPT
3.4 Formal business report
To
The Directors of the Thomas cook Date: 24th November 2016
Subject: Consumer behavior and attitude of the people in respect to tourism package
Sir/Mam
Introduction

With passage of time period situation get changes and business firms needs to formulae business
strategy in order to counter threat and capitalize opportunity. In the report, collected primary and
secondary data is analyzed and comments are made on same.
Research methodology
Sample of 60 respondents is taken and same are taken from the population by using stratified
sampling method. Questionnaire are distributed among these 60 people.
Data analysis
On analysis of data it is identiefied that cost of package is very high but people think that firm is
providing enough services to the customers. Firm sales is declining consistently and it is the time
when action must be taken to break this trend.
Recommendation
It is recommended that cost control strategy must be formulated in the business. By doing so
price of package can be reduced and revenue can be enhanced by creating customers at fast pace.
TASK 4
4.1 Information processing tools
Information processing refers to the process of converting or transforming raw data into
useful or meaningful manner that can be detected by observer or managers for the process of
decision-making. Some of the most important information processing tool that is available to
Thomas Cook’s managers is presented here as under:
Management information system (MIS): it refers an integrated user-machine system
that deliver required quantum of information to the managers to support decision-making such as
operation and effective management (Jordà, Schularick. and Taylor, 2011). It is a web database
that uses both the computer hardware and software and produce required information for
planning, analysis, controlling and making corporate decisions.
Executive information system: This computerized system gathers key information from
both the internal as well as external sources to deliver adequate amount of information to senior
executives and managers. It allow superiors and board members to drill down so as obtained
detailed information for ease of analysis and use GUI (graphical user interface). Thomas Cook’s

can integrate the system with MS excel, word and other decisions-supporting software to take
viable decisions.
Transaction processing system (TPS): This system capture, store, retrieve, modify and
process relevant data regarding business activities and functions for smoothen regular
functioning (Agresti and Kateri, 2011). In other words, it is a computerized or web based
database that record routing transactions which are necessary for conducting regular operations
and mainly used at operational level.
4.2 Network diagram
Thomas Cook desire to implement ERP system in the operations, in order to develop the
system effectively, project planner has identified following activities listed hereunder:
Task Name Duration Start Finish
Prede
cessor
s
Early Start Late Finish Total
Slack
Analysis of
necessary
requirement
installation
5 days Thu 11/24/16 Wed
11/30/16
Thu
11/24/16 Wed 11/30/16 0 days
Design system 15 days Thu 12/1/16 Wed
12/21/16 1 Thu 12/1/16 Wed 12/21/16 0 days
Programming 25 days Thu 12/22/16 Wed
1/25/17 2 Thu
12/22/16 Wed 1/25/17 0 days
Telecoms 15 days Thu 12/22/16 Wed
1/11/17 2 Thu
12/22/16 Wed 1/25/17 10 days
Installation of
hardware 30 days Thu 12/22/16 Wed 2/1/17 2 Thu
12/22/16 Wed 2/8/17 5 days
Integration 10 days Thu 1/26/17 Wed 2/8/17 3,4 Thu 1/26/17 Wed 2/8/17 0 days
Testing system 10 days Thu 2/9/17 Wed
2/22/17 5,6 Thu 2/9/17 Wed 2/22/17 0 days
Conducting
training 5 days Thu 2/23/17 Wed 3/1/17 7 Thu 2/23/17 Wed 3/1/17 0 days

Handover 5 days Thu 3/2/17 Wed 3/8/17 8 Thu 3/2/17 Wed 3/8/17 0 days
Horizontal line of gantt chart represents sequence and relationship among all the
identified activities with the time period to complete the same (Berenson and et.al., 2012). It
offer benefit to the planner to maintain coordination among all the functions and finish the
project on accurate time frame.
Figure 4 GANTT chart
Network diagram
Figure 5Network diagram

Critical duration of the project is calculated here as under:
Activity 1 + 2 + 3 + 6 + 7 + 8 + 9
= 5 + 15 + 25 + 10 + 10 + 5 + 5
= 75 days
This project will need minimum time period of 75 days to finish the project as per
planned time.
4.3 Project evaluation
Undiscounted cash flow models of investment appraisal does not considers time value hence
consider as less superior method for effective investment decisions over discounted techniques.
Payback period identify the length of time, in which, total of cash flows (cumulative cash
flows) cover initial cash outlay of the project (Black, 2011).
Accounting rate of return is a profit measurement technique which is used to anticipate
percentage of profit on required initial investment.
Contrary to non-discounted methods, discounted methods use discounted value of cash
flows by taking into consideration an appropriate cost of capital.
Net present value method helps to determine net yield by subtracting total discounted
cash outflow over the project duration from the initial outlay (What is project evaluation, 2016).
Internal rate of return is just a discounting rate where sum of discounted cash outflow and
opening or beginning investment comes equal.
Table 5Calcualtion of IRR
Project
P
Project S Project P Project S Project
P
Project
S
Cash
flows
Cash
flows
CCF CCF Discount rate
@10%
DCF DCF
Initial cash
outlay
-250000 -250000 -250000 -250000 1 -250000 -250000
2017 60000 53000 -190000 -197000 0.9091 54545.45 48181.82
2018 72000 68000 -118000 -129000 0.8264 59504.13 56198.35
2019 86000 84000 -32000 -45000 0.7513 64613.07 63110.44

2020 98000 102000 66000 57000 0.6830 66935.32 69667.37
2021 120000 132000 186000 189000 0.6209 74510.56 81961.61
IRR 19.23% 18.78% NPV 70108.54 69119.6
PBP
P = 3 year + (£32000/£98000)
= 3.33 year Or 3 year 4 months
S = 3 year + (£45000/£102000)
= 3.44 year Or 3 year 5 months
ARR = (Annual average cash flows)/(Initial cash outlay)*100
P = (£436,000/5 year)/(£250,000)*100
= (£87200)/( £250,000)*100
= 34.88%
S = (£439,000/5 year)/(£250,000)*100
= (£87,800)/(£250,000)*100
= 35.12%
From the derived results of non-discounted technique, it can be said that project P is
considered more suitable and yield worthy. It is because, this project will get back its initial cash
outlay of £250,000 in 3 year 4 months and also has higher possibility of ARR of 35.12%.
Moreover, NPV and IRR of £70,108.54 and 19.23% suggested Thomas Cook’s BOD to invest
money in project P in order to get more yield.
CONCLUSION
At end of the report, it is concluded that statistics is the domain that to large extent help
business problem in identifying solution of the problem. It is also concluded that before selecting
any project results of NPV and IRR must be considered. On the basis of analysis of results
specific project must be selected by the business firm. Network diagram must be used in order to
ensure that project will be completed on time and at minimum cost.

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Online
What is project evaluation, 2016. [Online]. Available through:<
https://www.reference.com/business-finance/project-evaluation-d86f4cc4c65080b1>.
[Accessed on 24th November 2016].