Business Decision Making

Business Decision Making

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
Assessing viability of project using investment appraisal tools & techniques......................3
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
In the recent times, with the motive to attain success and meeting organizational goals
managers lay emphasis on taking appropriate decisions. Now, several tools are available
which business unit can undertake for analyzing and appraising investment projects or
proposal. The present report is based on the case scenario of ABC which involved in the
trading of computer software. In this, report will provide deeper insight about capital
budgeting tools & techniques. It will shed light on how capital budgeting tools can be
employed for the selection of investment project.
Assessing viability of project using investment appraisal tools & techniques
Investment appraisal tools include collection of techniques which is used by the firm
for analyzing and identifying attractiveness of an event. It mainly includes net present value,
payback period, average and internal rate of return method (Sinha and Datta, 2020).
Payback method highlights or presents time period within which amount invested
initially will be recovered (Kengatharan and Prashanth Diluxshan, 2017). However, this
method does not present profitability that will be attained after payback period.
Net present value method presents return which firm will generate after specific time
period. This method is highly effectual for the purpose of decision making as it considers
time value of money concept while evaluating options.
The cited case situation presents that, ABC plc has two investment options project A
& B for business expansion. Now, manager is facing problem in relation to the selection of
best project out of two Motor software and hardware project. Both the projects have different
initial investments £40000 &£60000 respectively. In this regard, capital budgeting tools are
highly significant which helps in assessing project that company should select for investment
purpose.
Computation of NPV
Project A: Motor Software Project
Year
Cash inflow of
project A (in £)
PV factor @
12%
Discounted cash inflow
(in £)