Business Decision Making 1000w

TASK

P&I plc is a cookware manufacturing company, operating in the UK and some parts of the Europe. Currently, some of their productions such as stainless steel pots and energy-saving clay pots have been outsourced due to lack of available resources. However, strategic management of P&I plc is looking to invest in a project manufacturing stainless steel pots OR energy-saving clay pots. They have called new business proposals and have finally, chosen two projects using managers’ discretion to make final decision. 

Initial investment required for project A (stainless steel pots) is £90,000 and for project B (energy-saving clay pots) is £95,000. The discount rate required is at 14%. The net cash flows for two projects can be summarised as below:

Year

Project A – Stainless steel pots

Net cash flow £

Project B –  Energy-saving clay pots

Net cash flow £

1

35,000

28,000

2

45,000

44,000

3

68,000

72,000

4

79,000

98,000

5

105,000

110,000

You are required to write an essay on business decision making, comparing the key aspects of the payback period and Net Present Value (NPV), and financial and non-financial factors used to aid decision making.

Common Assessment Criteria 

Marks available

1. Calculation of the payback period

10

Calculation   of the payback period (years and months) in project A and B.

2. Calculation of NPV

20

Calculation   of the NPV in project A and B.

3. Analysis and Discussion: 

60

The ability        to evaluate and analysis the calculated results and make the final        decision by comparing two main financial techniques used to evaluate        projects.

Taking financial        and non-financial factors and their implication on investment decision        making process into the account.

5. Overall presentation including correct   referencing:

10

Use of Harvard referencing and overall   presentation.

TOTAL

100