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Investment Appraisal Techniques and Factors Affecting Business Decisions

   

Added on  2023-06-14

7 Pages1482 Words194 Views
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Essay
Investment Appraisal Techniques and Factors Affecting Business Decisions_1

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Computation of pay back period of DD plc. ..........................................................................1
2. Calculating net present value of project A and B ..................................................................2
3. Explaining financial and non financial factors affecting business decisions .........................3
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................5
Investment Appraisal Techniques and Factors Affecting Business Decisions_2

INTRODUCTION
Business decision making is a process in which every organisation has to take several
decisions related to operating and financial management of an enterprise (Almeida-Filho, de
Lima Silva and Ferreira, 2021). This report contains the computation of various investment
appraisal techniques such as pay back period and net present value of two different projects of
DD plc, vegetarian food manufacturing operating in UK. There are several financial and non
financial decisions which impact the decision making process is also encompassed in this report.
MAIN BODY
1. Computation of pay back period of DD plc.
Payback period - In capital budgeting decisions , there are different method to evaluate
the projects. In traditional method, it does not consider the time value of money. This tool is used
to know the duration or time period in which an cost of an investment in recovered (Cheng and
et.al.,2021) . while evaluating projects, shorter the pay back period better it is for an organisation
whereas higher pay back period projects are not considered profitable. It is calculated by taking
initial investment and average annual inflows (Remenarić, Čevizović and Kenfelja, 2018).
Project A (smoothies) Project B (non diary )
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
1
Investment Appraisal Techniques and Factors Affecting Business Decisions_3

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