X Plc is a reputed vehicle company, trading in the UK and other parts of Europe. Strategic managers of the company want to invest in new business. They have called a new business proposal and chosen two projects at the manager's discretion to make the final decision. The initial investment needed for project A is $ 20,000 and for the project, B is $30,000. The rate of return is expected to be at 10%. The net cash flow is summarized below:
|
Year |
Project A Technological project |
Project B mechanical project |
|
0 |
($20,000) |
($30,000) |
|
1 |
$8,000 |
$10,000 |
|
2 |
$10,000 |
$15,000 |
|
3 |
$12,000 |
$17,000 |
|
4 |
$15,000 |
$19,000 |
|
5 |
$19,000 |
$20,000 |
You are needed to provide an essay on business decision-making by covering the payback period and NPV, and financial and non-financial factors used to help in the decision-making.
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