Business Decision-Making: Evaluating Investment & Key Factors

This essay delves into the critical aspects of business decision-making, focusing on project evaluation through both discounting (NPV) and non-discounting (payback period) techniques. It assesses two potential investment projects for DD plc, determining their viability based on these methods, concluding that Project B, focused on non-dairy milk production, is the more profitable option due to its higher NPV. Furthermore, the essay comprehensively explores a range of financial factors, including expected return, cost and risk, capital structure, and liquidity position, alongside non-financial factors such as the nature of the business, technological advancements, and managerial competency, all of which significantly influence informed decision-making within a business context. The analysis emphasizes the importance of considering both quantitative and qualitative elements to ensure strategic and profitable investment choices.

BUSINESS DECISION-
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Project evaluation........................................................................................................................3
Financial and non-financial factors used in aiding decision – making.......................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
In the present essay is based on the selection of profitable project through evaluating
alternatives on the basis of discounting and non – discounting technique that is, NPV and pay
back period techniques of investment appraisal respectively. The investment evaluation will be
done on the basis of two projects that DD plc is considering of investment. Further, both
financial and non financial factors that are helpful in carrying out decision-making will be
evaluated.
MAIN BODY
Project evaluation
On the basis of Payback period method
Project A Project B
Years Net cash flows
from smoothies
Cumulative cash
flows
Net cash flows
from non-dairy
milk
Cumulative cash
flows
0 -158000 -158000 -155000 -155000
1 72000 -86000 71000 -84000
2 78000 -8000 73000 -11000
3 82000 74000 97000 86000
4 110000 184000 118000 204000
5 125000 309000 121000 325000
Payback period of Project A = 2 + 8000 / 82000 = 2 + 0.0975 = 2.09 years.
Payback period of Project B = 2 + 11000 / 97000 = 2 + 0.11 = 2.11 years.
Therefore, on the basis of payback period obtained for Project A and Project B, it has
been identified that it would take comparatively long time to recover the initial cost of
investment in case of Project B as compared to Project A, therefore Project A should be selected
over Project B in an attempt to get back the amount invested initially by the business (Gupta,
Fan and Tiwari, 2022).

On the basis of Net Present Value method
Project A Project B
Years Net cash
flows from
smoothies
Discounting
factor @
15%
Discounted
Cash flows
Net cash
flows from
non-dairy
milk
Discounting
factor @
15%
Discounted
Cash flows
0 -158000 1 -158000 -155000 1 -155000
1 72000 .8690 62568 71000 .8690 61699
2 78000 .7561 58976 73000 .7561 55195
3 82000 .6575 53915 97000 .6575 63778
4 110000 .5718 62898 118000 .5718 67472
5 125000 .4972 62150 121000 .4972 60161
NPV 142507 153305
From the above calculation of NPV for both Project A and Project B, it has been identified that
both the projects are having positive NPV which makes them qualified to get selected for making
investment in them. However, to select only of these two projects, project B would be selected
over project A. This is because the latter is having positive and higher NPV as compared to the
former which means Project B is more profitable than Project A (Lou and et.al., 2020).
Accordingly, manager should go for making investment in Project B that is the project meant for
producing non-dairy milk.
Financial and non-financial factors used in aiding decision – making
There are number of factors that need to be considered while making decisions which involves
both financial and non-financial factors such as the following:
Financial factors for decision-making
Expected return: While making any choice or decisions related to the project, it is necessary to
evaluate the returns that chosen project would be expected to generate (Paschek and et.al., 2018).
By determining and comparing expected returns of different projects, that project can be easily

selected which is having higher expected return in order to ensure higher profitability of the
business.
Return.
Cost & risk involved: Cost of different projects must be taken into account against the available
budget, so that decision makers could be able to determine how much fund are available within
them and how much they need to source externally. Also, evaluation of risk factor of losing on
the project must be determined in advance. It helps in deciding what actions are needed to reduce
or mitigate the resulting risk from investing in project. Both cost and risk are the most important
factor that need to considered in order to ensure better decision-making and profitability of the
business.
Capital structure of the business: Capital structure is one of the most important factor which is
helpful in deciding from which source does the additional finance be arranged, so that there must
be lowered costs and higher returns for the business (Baierle and et.al., 2019). It is also helpful in
understanding current risk profile, compatibility with investments that are already in place and
financial health of the business to determine whether the further actions would lead to
improvement or destruction of current financial position of the business.
Liquidity position: Another important factor that aids in deciding which project needs to be
selected over the other is to determine the pattern in cash inflows and outflows against the
current liquidity position of the business. With this factor, continuity in operations post making
of investment can be ensured.
Non-financial factors for decision-making
Nature of business: This implies distinct qualities of the business such as legal and industrial
structure within which the firm is operating. By appropriately determining this factor, accurate
decisions can be made regarding the selection of alternative, so that there could be no failure of
the investment resulting from nature of business (Osuszek and Ledzianowski, 2020).
Technological advancement: This factor helps in choosing that particular alternative which aids
business in keeping up with the advanced level of technology. Accordingly, business can be kept
competitive and sustained in the market by using required level of technology to meet the
changing business requirements.
Manager's and employee's competency: The competency and skills of managers is of great
importance in ensuring commitment towards the decisions made in a timely manner. It helps in

making decisions by following rules, policies & directives of the organization while resolving
issues and problems that the organization is facing.
CONCLUSION
From the above essay it has been concluded that there are two types of techniques that
could be used by management to select the most appropriate project. Furthermore, within this
essay there are numerous financial and non-financial factors that has been evaluated which is
meant for helping in decision making.

REFERENCES
Baierle, I. C., and et.al., 2019. An artificial intelligence and knowledge-based system to support
the decision-making process in sales. South African Journal of Industrial
Engineering, 30(2), pp.17-25.
Gupta, M., Fan, W. and Tiwari, A. K., 2022. Analytics for business decisions. Management
Decision.
Lou, C. X., and et.al., 2020, September. Literature Review on Visualization in Supply Chain &
Decision Making. In 2020 24th International Conference Information Visualisation
(IV) (pp. 746-750). IEEE.
Osuszek, L. and Ledzianowski, J., 2020. Decision support and risk management in business
context. Journal of Decision Systems, 29(sup1), pp.413-424.
Paschek, D., and et.al., 2018. Artificial Intelligence and the Way of Changing Decision-Making
for Business. Management, 16, p.18.