LO1: Demonstrate knowledge and understanding on key decision theories and principles and interpret different approach to business decision making processes.
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Essay on Business Decision Making |
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Learning outcomes assessed: |
LO1: Demonstrate knowledge and understanding on key decision theories and principles and interpret different approach to business decision making processes. LO3: Evaluate and interpret results generated by data modelling and forecasting techniques, including those provided by specialised statistical computer software LO5: Apply, and demonstrate an understanding of, relevant management science techniques.
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ABC plc is a computer software company trading in the UK and some parts of the Europe. Strategic managers of ABC plc are looking to invest in a new business. They have called new business proposals and finally, chosen two projects in managers’ discretion to make final decision. Initial investment required for project A is £40,000 and for project B is £60,000. The rate of return expected is at 12%. The net cash flows for two projects can be summarized as below:
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Year |
Project A – Motor Software Project |
Project B – Hardware Project |
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0 |
(£40,000) |
(£60,000) |
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1 |
£8,000 |
£10,000 |
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2 |
£12,000 |
£20,000 |
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3 |
£16,000 |
£25,000 |
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4 |
£20,000 |
£30,000 |
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5 |
£30,000 |
£40,000 |
You are required to write an essay on business decision making, covering the payback period and NPV, and financial and non-financial factors used to aid decision making.
