Project Evaluation and Business Decision-Making Report for ABA plc

This report analyzes the business decision-making process of ABA plc, a cycle brand company operating in the UK and Europe. It evaluates two potential projects using Net Present Value (NPV) and payback period calculations, determining that Project B is preferable based on its higher NPV. The report then delves into financial factors, including inflation rates, and initial investment considerations. Furthermore, it examines non-financial factors such as the impact of Brexit on the company, staff morale and motivation strategies, and the importance of effective management strategies. The analysis considers how these factors influence decision-making, providing a comprehensive overview of the company's approach to project evaluation and strategic planning.

Business Decision Making

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
NPV..............................................................................................................................................3
Payback period.............................................................................................................................4
Financial factors...........................................................................................................................4
Non financial factors:...................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................1

INTRODUCTION
Business decision-making is very important as it will guide the direction to the business.
ABA plc cycle brand company operating in UK as well as in Europe (Hermann, 2019). This
study will discuss the NPA and payback period of both projects and further will discuss the
financial and non financial factors which affect the decision-making process of the company.
MAIN BODY
NPV
It is the difference between of present values of cash inflows and outflows.
NPV for project A
year Cash flow PV factor @ 16% Discounted cash
flows(in €)
1 35000 1.16 40600
2 40000 2.32 92800
3 45000 3.48 156600
4 80000 4.64 371200
5 92000 5.8 533600
Total discounted cash flow 1194800
Less: initial investment 140000
NPV 1054800
NPV for project B
year Cash flow PV factor @ 16% Discounted cash
flows(in €)
1 46000 1.16 53360
2 55000 2.32 127600
3 60000 3.48 208800
4 80000 4.64 371200

5 100000 5.8 580000
Total discounted cash flow 1340960
Less: initial investment 180000
NPV 1160960
The NPV of project B is greater so that is why it will be selected.
Payback period
It means the time which the project will take so that the cost on the investment can be recovered.
Payback period for project A
year Cash flow Cumulative cash flow
1 35000 35000
2 40000 75000
3 45000 120000
4 80000 200000
5 92000 292000
Payback period = 3+(140000-120000)/80000
=3+0.25
=3.25
Payback period for project B
year Cash flow Cumulative cash flow
1 46000 46000
2 55000 101000
3 60000 161000
4 80000 241000
5 100000 341000

Payback period=3+(180000-161000)/80000
=3+0.2375
=3.24
the payback project of project A&B both are equal so any project can be selected.
Financial factors
Inflation Rate-
Inflation rate is increment or decrement in the pricing of products or services during a specified
period of the month or an year (Osabuohien and et.al, 2018). ABA plc has to make sure that it is
able to establish product pricing in context with the increasing inflation rate through which it can
make sure that organization is able to achieve increased sales and achieve a high economic
background. This is important because if the inflation rate are high enough then in that case it
will make negative impact on sales due to which company must establish product pricing on the
basis of inflation rates.
Initial Investment-
Organizations like ABA plc has to make sure that it is able to develop product such that it can
achieve high level of work productivity for the customers and for which it has to take creative
working measures for achieving efficient amount of investment for the development of products.
Company has to achieve efficient amount of initial investment in such a way that it can fulfil the
expenditures made for the development and testing of the developed product and make sure that
developed product is according to the quality standards.
Source Borrowing (Loan/ Overdraft)-
Source borrowing is the creative mean through which organizations like ABA plc can achieve
proper capital requirement for successfully operating a operation. Thus, company can utili9ze
creative options like bank loans or credit unions through which it can make sure that requirement
for maintaing organizational operations is being fulfilled and company is able to achieve its
desired targets.

Non financial factors:
Along with the financial factors, non financial factor are also considered vital for the
decision-making process. It includes factors like meeting the requirement of the legislation
which can be both future and present, carrying ethical industry practice, improvising the
employee morale etc. discussion of three non financial factors which are:
Brexit:
Brexit has already slowed down the economy of UK, the main concern is related to the potential
disruption (Marchau and et.al., 2019). ABA plc cycle brand company also got adversely affected
by the impact of Brexit as it is operating in UK as well as EU. Earlier the company easily gets
low cost and skilled employee from European union and now because of Brexit workers cannot
come easily and work in UK, they have to take permission from the government as there is a ban
on the freedom of the movement of workforce. The flow of goods and services from UK to EU
also shows the anticipated effect of Brexit so now the company have to search for the supplier in
UK only and the UK products are also not that much purchased by the EU people because of
extra charges and new rules relating to trading.
Staff morale/motivation:
Staff motivation plays vital role in increasing the profits of the company as it is helpful in
increasing the productivity of the employees. ABA plc cycle company while carrying their
decision-making process also consider those factors which increase the motivation of the
employees. Company regularly comes with incentives and compensation schemes or reward
systems because they know this very well that financial aspects motivate the employees and
company can also appreciate the employees this will be also helpful in boosting the performance
of the workforce. Delegating responsibilities to employees also helpful in increasing the
employee morale. On every weekend company plan some social activity which relaxes the
employees and helps in building the concentration power.
Management strategies:
Management strategies are the technique which direct the company so that the company's
objectives can be achieved. Strategies can be related to goals, decision-making, leadership,
operational activities etc. company make strategies for the long run which helps the company to
take the competitive advantage (Crouzet and Mehrotra, 2020). It has five stages which are setting
goal, situation analysis, strategy formulation and implementation, evaluation and control. Firstly

company set the goal and do external and internal analysis so that the business needs can be
understood. ABA plc cycle company While making strategies for the company involve top-level
workforce but also take opinions of other employees and consider it while making any decisions
regarding strategies.
CONCLUSION
Through this report it can be concluded that while making the decisions company
consider net present vale of project B and pay back period of both projects are equal. Evaluation
of the financial and non financial factors so that can understand the decision-making.

REFERENCES
Books and journals
Crouzet, N. and Mehrotra, N.R., 2020. Small and large firms over the business cycle. American
Economic Review. 110(11). pp.3549-3601.
Hermann, M.G., 2019. Leaders and foreign policy decision-making. In Diplomacy, force, and
leadership: essays in honor of Alexander L. George (pp. 77-94). Taylor and Francis.
Marchau, V.A. and et.al., 2019. Decision making under deep uncertainty: from theory to
practice (p. 405). Springer Nature.
Osabuohien, E.S.C. and et.al, 2018. Inflation rate, exchange rate volatility and exchange rate
pass-through nexus: The Nigerian experience. Journal of Applied Economic
Sciences, 2(56), pp.574-585.
1