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:
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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
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Project A – Motor Software Project
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Project B – Hardware Project
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0
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(£40,000)
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(£60,000)
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1
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£8,000
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£10,000
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2
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£12,000
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£20,000
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3
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£16,000
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£25,000
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4
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£20,000
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£30,000
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5
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£30,000
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£40,000
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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.
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