Reference no: EM133759456 , Length: Word Count: 1000 Words

Problem: Business Decision Making

DD plc is a vegetarian food manufacturing company, operating in the UK and some parts of the Europe. Currently, some of their productions such as smoothies and non-diary milk have been outsourced due to lack of available resources. However, strategic managers of DD plc are looking to invest in a project producing smoothies or non-diary milk. 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 (smoothies) is £158,000 and for project B (non-diary milk) is £155,000. The discount rate required is at 15%. The net cash flows for two projects can be summarized as below:

Year     Project A - Smoothies Net cashflow £           Project B -Non-Diary Milk Net cashflow £
1                           72,000                                                          71,000
2                           78,000                                                          73,000
3                           82,000                                                          97,000
4                           110,000                                                        118,000
5                           125,000                                                        121,000

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