Business Decision Making: Payback Period and Net Present Value

Essay on Business Decision Making

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1.Computation of pay back period of project A & project B......................................................3
2.Computation of net present value of project A and project B..................................................4
3.Final decision...........................................................................................................................5
4.Role of financial as well as non financial factors in decision making procedure....................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business decision making is systematic procedure through which manager able to take
decision regarding which beneficial for organization. In order to understand procedure of
decision making ABA plc has been taken. This organization run business in selling their
electronic cycle products, within and outside UK. This report has been define relevance of
capital budgeting tool for the purpose of take decision as well as impact of financial and non
financial factors during the time of taken essential business decision.
MAIN BODY
1.Computation of pay back period of project A & project B.
Pay back period: This is tool of capital budgeting. Manager use to calculate pay back
period for the purpose of determine time require to cover up or fulfil initial cost required for run
specific business project. Higher pay back period show organization required more time to cover
up their cost (Yang, 2018).
Project A ( Electric Cycles)
Year Cash flow Cumulative cash inflow
1 35000 35000
2 40000 75000
3 45000 120000
4 80000 200000
5 92000 292000
Pay back period = Year before cost recovery + Remaining cost / Cash flow for particular year=
3.25
Project B ( Electric Scooters)
Year Cash flow Cumulative cash inflow
1 46000 46000
2 55000 101000