Business Decision Making: Statistical and Capital Budgeting Report

This report provides a comprehensive overview of business decision-making processes, focusing on the application of statistical tools and capital budgeting techniques. It begins with an introduction to business decision-making and its importance, followed by an analysis of statistical tools such as frequency tables, mean, median, mode, range, and standard deviation. The report then delves into capital budgeting methods, including the payback period, internal rate of return (IRR), and net present value (NPV), explaining their methodologies, advantages, and disadvantages. A network diagram is also discussed as a project management tool. The report includes calculations and interpretations for each method, providing practical insights into how these tools can be used to make informed business decisions regarding investments and project evaluations. Finally, it concludes by emphasizing the significance of these tools in achieving organizational goals.

The Business Decision
Making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
QUESTION1...................................................................................................................................1
QUESTION 2..................................................................................................................................1
QUESTION 3..................................................................................................................................3
QUESTION 4..................................................................................................................................3
QUESTION 5..................................................................................................................................4
QUESTION 6..................................................................................................................................5
CONCLUSION................................................................................................................................6
REFRENCES...................................................................................................................................6

INTRODUCTION
Business decision making is the process through which organization or personals take
decision for attiring their business goals. This report has been formulated to solving the questions
which is related the statistical as well as capital budgeting tools. It considers the use and relevant
of statistic as well as investment appraisal technique which useful in decision making.
QUESTION1
Statistical tool: These are the tools and techniques which use by statistical or researchers or
business organization for collecting primary and secondary sources of information. By
identifying of frequency organization understand the number of chance of business activates
aeries for attaining particular business objectives (Yoo, Yoo, Kong, and Choi, 2015).
Frequency table
Number of students Telly Frequency
2 11 2
3 1 1
4 1111 4
5 1111 4
6 1111∕ 5
7 11 2
8 111 3
9 1 1
Total 22
This table show the 22 frequency or actions use for calculation of particular project.
QUESTION 2
Statistical investigation is those facts are collected and then they are edited. Average is
known as mean of particular series which spent the entire series. Mean is calculate for
representing particular series during the time of research. This is useful for getting calculation
easier and provides basis for analysis purpose.
Mean = Sum of all the terms / Number of all term =

Data
set
7
7
8
9
9
11
15
15
15
20
20
22
28
29
36
45
54
350
Mean = 350 / 17 = 20.58
This define that 20.58 is the aggregate and representing value of entire data series.
Medium =
This define or consider ad centre point of series. Which is derived by arraigning series either in
an ascending order or in as descending order. It is simple and specific methodology which used
by researcher for their investigation purpose. Number of observation + 1/ 2 = 15 is medium
Mode =It is consider as most likely value within the series which arises during the enteric
research data. By inspection it seem that mode is 15, because it occurs 3 times and its frequency
is maximum thus 15 is considered as mode (Baur, Hong, and Lee, 2018).
Range: It is measurement which shows the range of particular set. It is measurement of
dispersion. Formula of range = E2- E1 = 7 – 54 = 47
Standard deviation = It is measurement of amount and value of dispersion. This value show
variation. It describe those value which are related with means. Higher value of standard
variation show large area of spreading value of standard deviation. Which define variation with
set of data.
Data
set X - X X-X2

7 -13.58 184.44
7 -13.58 184.42
8 -12.58 158.25
9 11.58 134.04
9 -11.58 134.04
11 9.58 9.177
15 5.58 31.13
15 5.58 31.13
15 5.58 3.13
20 0.58 0.336
20 0.58 0.336
22 1.42 2.0164
28 7.42 55.056
29 8.42 70.89
36 15.42 237.77
45 24.42 596.33
54 33.42 1116.89
350 2949.381
20.58
Variance = 2450/17-1 = 153.125
Standard deviation = √2450/17-1 = 13.57
QUESTION 3
Network Diagram: This is tool of project management which useful in describing and
defining graphical method of showing the way ad business activities which require for achieving
business result. These are help for organization to recognizing path required for attaining
business goals. By making network diagram management department able to understand each
activity, their time duration and risk related with particular business activity (Gayah, Gao, and
Nagle, 2014).

QUESTION 4
Pay back period: It is the period which define time required by business organization for
recovering initial investment cost. Higher time required for pay back period showcase that
organization need more time for recovering their project cost and it depict slow rate of profits
On the other side the calculation of pay back period is comparative lower then it represent that
organization required less time for recovering their project initial cost.
Value of pay back period when cash flow are uneven =Y+Intial investment – Cash inflow of
period /Cash inflow during the year of recovery
year
Payback period when cash flows are uneven
Cumulative cash
inflow
1 75000
75000
2 140000 215000
3 200000 415000
4 110000 525000
5 60000 585000
Initial investment 550000
4+525000-550000/60000 = 4.41

Interpretation: By calculating pay back period it identify that organization if invest
550000 in particular project then they need 4.122 years of time for recover this amount by
running business activities. But this time is more then desired pay back period time, thus this
project is not acceptable.
QUESTION 5
Internal rate of return: This is also a method of capital budgeting which is also know as
Time adjusted rate of return, or marginal rate of return, or marginal efficiency of capital. It is
based on the discounting technique model. It also considered tie elements. Internal rate of return
is the rate which actually equal to the present value of expected cash inflows with the present
value of expected cash outflow.
In other words the internal rate of return is the rate of discount which equals to the
aggregate present value of estimate cash inflow with the aggregate or overall value of cash
outflow of particular project. It is most useful and appropriate method of capital budgeting
which given accurate business result . It helpful in achieving business objective by providing
accurate and relive business result (Dhavale, and Sarkis, 2018).
Higher internal rate return show higher rate of profitability on the other side investor
choose or decide which method and proposal which useful and helpful in generating high rate of
future profits. This showcase future rate of profitability rate which is useful in attaining business
goals. Following are the benefits and drawbacks of this method
Maximisation of shareholders worth: It is most effectual and profit generation method which
useful for investor to select those alternative though which they can able to enhance worth of
their shareholders.
Risk & uncertainty: This method provides for is and uncertainly by recognizing the time
value of money.
No cut off rate: By using internal rate of return method it does not require computation
of minimum desired rate of return or cut off or hurdle rate for computation of best alternative
(Yang, 2018).
Disadvantage
Difficult to understand: It involves complicated calculations hence it is really difficult
to understand and use this method for organizations

Difficult in decision making: It become really difficult and hard to whether project
should b accepted or not because internal rate of return gives concussing and compacted business
result.
Incomparability: The result obtain through IRR method may not match with the result
of NPV method if the project differ in their expected lives or cash outflow.
QUESTION 6
Net present value this is also an alternative which s useful in getting the best result. In this
method value of present cash outflow is also use . Which useful in getting best business result. It
is considered as the first and foremost discontenting method of cash flow technique which used
by organization for their business proposal. It is alternative method do capital budgeting. This
method is applicable only when the rate of return on investment is pre determine by business
organizations. The net present value of an investment proposal may be defined as the difference
between the present value of future cash inflows and present cash outflows of discounted at the
organizations cost of capital.
It is aggregate of present value of expected inflows deducted the total present value of outflow.
Following are the advantage and disadvantage of this method
Benefits of life span: This method considered all the essential cash flows over the entire period
of project.
Time value: The NPV method of capital budgeting useful in considering and recognizing time
value of money. This is the most significant advantage because payback period and ARR method
does not consider this elements (Gorshkov, Rymkevich, , Nemova and Vatin, 2014).
Disadvantage:
Difficult to calculation: This is compete hard method for calculating the best alternative result.
Difficult to determine cost of capital: This method of cash inflows of different years are
discounted at a pre determine rate of return which is generally the cost of capital.
Require expertise: For calculation of best alternative b using net present value organization need
of hire personals when have knowledge regarding each accounting standard as well as market
condition.

CONCLUSION
From the above analysis it has been define that for taken effective business decision
organizations need to use effective statistical as well as management tools . Theses are consider
mean, medium, central tendency tools as well as tools of capital budgeting. By using tools of
central tendency personals able to collect primary as well as secondary data for their research
and on the other side with the use of effective technique of investments individual take decision
regarding selection of best alternated which help in generating business profit.

REFRENCES
From books and journals
Yoo, Y., Yoo, T., Kong, J. and Choi, S., 2015, June. Emotional responses of tactile icons: Effects of
amplitude, frequency, duration, and envelope. In 2015 IEEE World Haptics Conference
(WHC) (pp. 235-240). IEEE.
Baur, D.G., Hong, K. and Lee, A.D., 2018. Bitcoin: Medium of exchange or speculative assets?. Journal
of International Financial Markets, Institutions and Money, 54, pp.177-189.
Gayah, V.V., Gao, X.S. and Nagle, A.S., 2014. On the impacts of locally adaptive signal control on urban
network stability and the macroscopic fundamental diagram. Transportation Research Part B:
Methodological, 70, pp.255-268.
Dhavale, D.G. and Sarkis, J., 2018. Stochastic internal rate of return on investments in sustainable assets
generating carbon credits. Computers & Operations Research, 89, pp.324-336.
Yang, M.H., 2018. Payback period investigation of the organic Rankine cycle with mixed working fluids
to recover waste heat from the exhaust gas of a large marine diesel engine. Energy Conversion
and Management, 162, pp.189-202.
Gorshkov, A.S., Rymkevich, P.P., Nemova, D.V. and Vatin, N.I., 2014. Method of calculating the
payback period of investment for renovation of building facades. Stroitel'stvo Unikal'nyh Zdanij i
Sooruzenij, (2), p.82.