Business Decision Making for DD Plc: Payback Period, Net Present Value, and Factors Affecting Decision Making

BUSINESS DECISION
MAKING

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1. Payback Period of DD Plc:.................................................................................................3
2. Computation of Net Present Value:....................................................................................4
3. Financial and Non-Financial Factors that Contributes in Decision Making:.....................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business decision making simply means considering best option for the desired projects
which are available that which one is better for the organisation (Poggensee and Poggensee,
2021). This can be decided by performing various financial test after taking into account
different methods such as Net present value, Payback period, internal rate of return, profitability
index etc. It is a defined procedure to select the alternate among various options available so that
best alternate is selected considering the needs of the organisation and the resource availability
they have.
TASK
1. Payback Period of DD Plc:
Payback period is a financial tool which helps in analysing the desirability of the project
the entity needs to take into account (Pradhan, Arvin, and Hall, 2019). This method helps the
business concern to evaluate that how much time the project will require to order to recover its
investment they make initially in the proposed project.
Calculation as under: -
Project A - Smoothies Project B - Non Dairy
Year Cash Flow Cumulative Cash
Flows
Cash Flow Cumulative Cash Flow
0 -158000 -158000 -155000 -155000
1 72000 -86000 71,000 -84000
2 78000 -8000 73,000 -11000
3 82000 74000 97,000 86000
4 110000 184000 118,000 32000
5 125000 309000 121,000 153000
`
Payback period of Project A
= 2 years + 8000 / 82000
= 2 years + 0.097