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
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