Investment Appraisal Techniques for Decision Making: A Case Study of Akwaaba Plc

Business Decision
Making

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Computation of payback period of Akwaaba Plc:..................................................................3
Calculation for Akwaaba Plc Net Present Value....................................................................4
Evaluation of computed results and Making final decision:..................................................5
Determine financial and Non-financial factors used to aid decision making.........................5
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
As per below report, Some decision are made on the basis of analysing the performance.
Akwaaba Plc is a textile company which mainly operational in United Kingdom and other
European countries. Akwaaba Plc deals in Bags and shoes but it have been outsourced due to a
lack of available resources. Company has to select one product form the bag and shoes. In this
report future Profitability and success of both the product is measured with the help of
investment appraisal techniques and determine financial and non financial factor which effect
decision making process.
MAIN BODY
Computation of payback period of Akwaaba Plc:
Before making a investment in a particular project, Company has to analyse project
goodwill and its future performance in the market. Company's generally apply some techniques
to analyse future investment returns and profitability of a particular project. Here Akwaaba Plc
also using payback period method to measure returns on both investments. Payback period refers
to the time required to recover the cost which incurred in an investment (Boddapati, Nandikatti
and Daniel, 2021). It plays a very important role in decision making process. This method
applied here to compute future returns of bath the investment. The calculation of payback period
is as follows:
Year Project A – Bags
Net cashflow £
Cash flow Cumulative cash flows
0 -180000 0
1 48,000 48000
2 62,000 110000
3 85,000
4 1,00,000
5 1,10,000
Payback period of project A = Years Before Break-Even + (Uncovered Amount / Cash
Flow in Recovery Year)
= 2 years + (70000 / 85000)
= 2 + 0.82