Business Decision Making: Payback Period and Net Present Value Analysis

Essay on Business decision making

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
Payback period.............................................................................................................................2
Net present value.........................................................................................................................3
Financial factors...........................................................................................................................5
Non-financial factors...................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
In the current times, most of the businesses are relied upon business decision making
application which provides better results and choosing best path of investment. Similarly, the
present study is based upon the DDK Plc is operating in UK and now invest in another areas i.e.
belts and trainers. For that two different investments done along with net cash flows, therefore,
for better decision making, study suggest best investment by applying NPV and Payback period.
Further, it evaluate different financial and non-financial factors used for better decision.
Payback period
For project A
Initial investment
170000
Year Net cash flow Cumulative Cash flow
1 45000 45000
2 45000 90000
3 35000 125000
4 70000 195000
5 82000 277000
3 170000 – 125000 = 45000
= 45000 / 70000 = 0.6
Pay back period 3.6 years
For Project B
Initial investment
190000
Year Net cash flow Cumulative Cash flow