Business Decision Making Report: Financial Decision Making Analysis

This report examines business decision-making processes, specifically focusing on a case study involving XYZ Plc, a hotel chain. The analysis centers on two potential projects: a software project (Project A) and a laundrette project (Project B). The report assesses these projects using Net Present Value (NPV) and payback period methodologies. The NPV analysis reveals that Project B has a higher NPV than Project A, indicating greater potential financial benefits. Both projects have the same payback period. Furthermore, the report delves into the various financial and non-financial factors that influence managerial decision-making, such as project costs, potential profits, technological presence, and human resource availability. Based on the financial analysis, the report recommends that XYZ Plc select Project B, considering its superior return on investment and the importance of considering various factors in the decision-making process.

BUSINESS
DECISION MAKING

Table of Contents
MAIN BODY...................................................................................................................................2
REFERENCES................................................................................................................................5
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MAIN BODY
Project decision making
XYZ Plc is the hotel chain , who used to operate in the UK and also some part of the UK,
it has been identified in the recent time that due to lack of the resources organization has
outsourced laundrette as well as hotel software in the organization but now organization has
decided to procure one resources by own and for the same reason two different type of the
resources which has been selected in the organization. Different statistical data about both the
project are as follow on the basis of the same manager can make different decision in an
organization.
Assessment of net present value (NPV)
Year Project A –
Software Project
Discounting factor @
11%
Present value
of cash flows
1 28000 0.901 25225
2 32000 0.812 25972
3 35000 0.731 25592
4 55000 0.659 36230
5 78000 0.593 46289
Discounted cash flows 159308
Less: initial investment 100000
NPV 59308
2

Year Project B – Laundrette
Project
PV factor @
11%
Present value of
cash flows
1 31000 0.901 27928
2 38000 0.812 30842
3 43000 0.731 31441
4 64000 0.659 42159
5 89000 0.593 52817
Sum of discounted values 185187
Less: initial investment 120000
NPV 65187
Assessment of Payback period
Year Project A – Software
Project
Cumulative figures
1 28000 28000
2 32000 60000
3 35000 95000
4 55000 150000
5 78000 228000
3.1 years
Payback period 0.1
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Year Project B – Laundrette
Project
Cumulative cash flows
1 31000 31000
2 38000 69000
3 43000 112000
4 64000 176000
5 89000 265000
3.1 years
Payback period 0.1
After analysing the above stats it has been analysed that NPV of Project A is 59308,
where as net present Value (NPV) of project B is 65187. So it has been identified that going with
the Project B will be more beneficial for the company as compare to the project A which
company is looking, as Project B will help the company in getting better value out of the
investment which will be made by the company.
Another Analysis shows the Payback period, it is the period after which organization will
able to cover up all the investment which has been made by the company in the market, payback
analysis shows that Project A will take 3.1 years to cover up all the investment. At the same time
Project B will also take 3.1 years to cover up the investment which has been made in the
organization. So after going through the analysis it has been identified that procuring any of the
project in the organization will not make any of the changes in the organization, as it has been
analysed that both the project will able to give the return on the same time in the organization
(Consigli, Kuhn and Brandimarte, 2017).
After going through both the analysis it has seen that procuring project B in the
organization will be more beneficial as compare to project A in the organization, as both the
project will give the outcome on the same period of the time but Project B will help the company
in getting good return, so looking at the standardize basis organization should go with the project
2 in the organization. So selecting the Project B will be more beneficial as compare to A
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Different factor consider at the time of making financial decision
There are many different type of factor which are generally consider by the organization and
their manager to make the variety of the different type of the decision in the organization. Some
of the financial and non financial decision which are generally consider by the manager are in the
next paragraph.
Starting at the financial factor, first element which is consider by the organization is the
cost of the product, cost hear generally means the amount of the money which organization has
to invest to procure variety of the different thing in the organization, so manager always used to
consider the cost of the thing and on the basis of the same used to make the variety of the
different decision in the organization (Lu, Won and Cheng, 2016). Profit is the anther thing
which is also consider by the organization manager at the time of making different decision, all
the manager generally used to forecast the future benefit which may be seen by the company if
they will make the amount of the investment which will be done by the company, so for the same
reason organization used to look at the profit context before making any sort of the decision in an
organization. Another thing which is generally looked by the manager at the time of making
different decision in the organization is the payback period, payback period generally used to
give the manager a idea about the time period which will be taken by the project to give the back
the investment which has been done. As investment used to bring variety of the circumstances
for the company in the long period, all the manager in the organization generally used to look at
the project who will be giving the investment back in shorter period of time in the organization.
So all the organization generally used to look at project who’s payback period is very less as
compare to the other project in the market.
There are many Non financial factor which are also, consider by the manager at the time
of making variety of the different type of the decision in the organization some of some factor
are technology presence in the organization, as it has been identified that all the manager
generally used to see at the current position of the business and specially used to see the
technology presence in the organization, on the basis of the same different decision in the
organization are taken by the manager in the organization (Hirshleifer, Jian and Zhang, 2018).
Another, non financial factor which is generally consider by the manager in the organization is
the Human resource presence of the company in the market, as it has been identified that it is
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very important for the organization to have a good amount of the Human resource as they are the
one in the organization who used to carry out the different operation of the business in the long.
So organization always considers the presence of the Human resource in the organization on the
basis of the same different decision is being made in an organization. Manager also used to
consider current resource base of the company and on the basis of the same organization used to
check the benefit which will brought by new resources in the organization and on the basis of the
same organization used to make the variety of the decision in context of expanding their business
or improving the efficiency of the business in the long run (Bangma and et.al., 2019).
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REFERENCES
Books and Journal
Hirshleifer, D., Jian, M. and Zhang, H., 2018. Superstition and financial decision
making. Management Science. 64(1). pp.235-252.
Lu, Q., Won, J. and Cheng, J. C., 2016. A financial decision making framework for construction
projects based on 5D Building Information Modeling (BIM).International Journal of
Project Management. 34(1), pp.3-21.
Consigli, G., Kuhn, D. and Brandimarte, P., 2017. Optimal financial decision making under
uncertainty. InOptimal Financial Decision Making under Uncertainty(pp. 255-290).
Springer, Cham.
Bangma, D. F and et.al., 2019. Financial decision-making in adults with
ADHD. Neuropsychology.
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