Internal Code: MAS1678
Question 1: Methods Used in Business Decision Analysis
Business decision analysis is crucial in any form for making of the right choices often results in success, while the wrong ones result in failure. Some methods are used to make decisions in business. The methods used include;
i) Discounted cash flow technique – This technique can be used to make decisions as it pertains to investment concerning the increasing budget on the real estate business. The future value of investments in real estate can be calculated by the use of the available data, like interest rate so as to determine what needs to be done as the budget rises. Once the future value of the investment has been determined, then the right budget figures can be estimated out explicitly, thus, right decisions are made.
ii) Net present value (NPV) – Also, decisions can be made by the use of the NPV technique. This method involves the conversion of the future value of the costs and benefits of the real estate investment to today’s value (Vance, 2013). The value helps in making the right decisions on when best doing business regarding the
iii) Internal rate of return (IRR) – The internal rate of return (IRR) is another technique that will be used in solving the problem in real estate business. One can determine the route to follow after calculating the discount rate and know when best to make decisions on investment from an increasing budget.
iv) The average rate of return (ARR) – This method can also be used to estimate the rate of return on any investment and then making decisions on when is the best time to invest as it regards to the increasing budget (Tyson, 2011). The technique helps one to know what the outcome will be after covering a relevant period available.
v) Payback period – Payback period is one of the popularly used methods of making decisions. The technique involves determining the amount of time it will take for any investment to pay for the costs incurred regarding the time value of money. It is clear that one will make decisions as when it is best to invest in a real estate business considering the increasing budget. It is significantly always to decide when to start a project and know how long it will take to complete (Vance, 2013).
vi) Cost-benefit analysis (CBA) – Cost- benefits analysis is one of the commonly used methods in the field of business. For an increasing budget in a real estate business, it is important to take into consideration the costs and benefits of such an investment. The benefits need to outdo the costs or be equal, so as to avoid making losses continuously. A decision tree also can be used to determine when to invest in a real estate business regarding the increasing budget (Vance, 2013). All these techniques are essential, and one should choose carefully the best one to be used when making the decision concerning investing in a real estate business.
Question 2: Tools to Be Used in Solving the Decision Problem
There are a number of tools which can be used in solving the decision problem.
1. First, the decision matrix tool. The tool can be used to evaluate all the options available, and then choose the option with the highest score. The tool is important since all options take into consideration before making the final decision on whether to invest in the real estate business regarding the increasing budget or not (Kourdi,
2. Secondly, the decision tree can be used to solve the problem. The decision tree can be drawn as it contemplates all the options and when best to invest in the real estate business concerning the increasing budget (Brady, 2016). The tool is one of the best since it involves the use of statistical analysis.
3. Thirdly, SWOT analysis tool. The tool can be used to analyze the strengths of investing in the venture, weaknesses that will be involved in the business, opportunities available in the investment, and the threats if any available in the real estate business concerning an increasing budget. One can make decisions based on the tool to come up with better solutions to the problem. Fourth, the use of control chart tool. The tool can be used to decide whether a process is within the expected period and then come up with better decisions to solve the problem.
4. Decision-making software tool. The tool can be used to solve the problem of investing in real estate when there is an increasing budget automatically (Brady, 2016). The software has some features that are necessary when it comes to solving such problems.
In conclusion, business decision-making analysis involves choosing the best technique applicable to the problem in order to come up with the best solution possible. It is important to note that, when the best technique and tool is used to make decisions, success is likely to be met. From, the number of techniques outlined above, cost-benefit analysis is the best technique to be used if the problem is demanding like the real estate investment.
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