XYZ plc is a budget hotel chain, trading in the UK and some parts of the Europe. Currently some services laundrette and hotel software system have been outsourced due to lack of available resources , However strategic managers of XYZ plc are looking to invest in a software or a laundrette project . They have called new business proposals and finally , chosen two projects in managers discreation to make final decision . Initial investment required for project A [ software] is £100.000 and for project B [Laundrette] is £120.000 . The discount rate required is at 11% . The net cash flows for two projects can be summerized as below

Year Project A- Software Project
0 [£100.000]
1 £28.000
2 £32.000
3 £35.000
4 £55.000
5 £78.000

Year Project B- Laundrette Project
0 [£120.000]
1 £31.000
2 £38.000
3 £43.000
4 £64.000
5 £89.000

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.

Answer rating: 100% (QA)

Project with positive and higher NPV is chosen over the other Similarly project with less payback pe... View the full answer