Use of software-generated information to make organizational decisions

CONTENTS
1 Introduction…………………………...………………………3
2 Analysis
4.1Use appropriate information processing tools………………………..4
4.2 Prepare a project plan for an activity and determine the critical path.5
4.3 Use financial tools for decision making……………………………..7
3 Conclusions………………………………………………….11
References…………………………..…………………………11

Introduction
The net present value method works out the present values of all items of income and expenditure related to an investment at a given rate of return, and then works out a net total. If it is positive, the investment is considered to be acceptable. If it is negative, the investment is considered to be
wances (250,000) (250,000) (250,000) (250,000)
Taxable profit 37,000 195,200 395,750 67,520
Taxation (11,100) (58,560) (118,725) (20,256)
After-tax profit 25,900 136,640 277,025 47,264
Capital allowances 250,000 250,000 250,000 250,000
After-tax cash flow 275,900 386,640 527,025 297,264
Initial investment (1000000)
Working capital (50960) (29287) (37878) 59157 58968
Net cash flows (1050960) 246613 348762 586182 356232
Discount at 12% 1.000 0.893 0.797 0.712 0.636
Present values (1050960) 220225 277963 417362 226564
NPV=$91154
Workings
Sales revenue
Year 1 2 3 4
Selling price ($/unit) 20.80 21.63 22.50 23.40
Sales volume (units) 35,000 53,000 75,000 36,000
Sales revenue ($) 728,000 1,146,390 1,687,500 842,400

Variable costs
Year 1 2 3 4
Variable cost ($/unit) 12.60 13.23 13.89 14.58
Sales volume (units) 35,000 53,000 75,000 36,000
Variable costs ($) 441,000 701,190 1,041,750 524,880

Total investment in working capital
Year 0 investment=728,000*0.07=$50,960
Year 1