Essay on Business Decision Making

ESSAY ON BUSINESS
DECISION MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Calculation of payback period in project A & B:...................................................................3
2. Calculation of NPV:................................................................................................................4
3. Analysis:..................................................................................................................................5
4. Practical implications..............................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Enterprises must take important investment choices so that they can achieve greater
returns. There are different kinds of methods, including net present value, internal rates of return
and much more, to carry out an efficient study of finance programs (He, Wang and Akula, 2017).
The report is based on ABC plc that is a computer software corporation. Company is planning to
spend in two new ventures. The study evaluated both proposals by help of various techniques
and carried out a critical review.
MAIN BODY
1. Calculation of payback period in project A & B:
For project A:
Years Cash flow Cumulative cash flow
0 (40000) -
1 8000 8000
2 12000 20000
3 16000 36000
4 20000 56000
5 30000 86000
Payback period= 3+4000/20000*12 months
= 3 years + 2.4 months
This shows that cost of 40000 of project will be covered in 3 years and 2.4 months.
For project B:
Year Cash flow Cumulative cash flow
0 (60000) -
1 10000 10000
2 20000 30000
3 25000 55000
4 30000 85000