Decision Making

Decision Making

Decision Making

Decision Making: Before a firm commits resources for expansion, employee recruitment, or other long-term investment options, careful analysis and estimation of the predicted costs and benefits is critical. Capital budgeting refers to the process of choosing the best long-term investment that will ensure maximum profit and less costs for the owner.

Due to this, appropriate decision-making techniques have to be applied. In our case, the firm in study is specialist laboratory that needs more employees to work in a stipulated additional shift due to an increase in demand of their services. This paper discusses the appropriate tools and techniques for making good decisions in such a scenario, as well as any traps that may cloud one’s judgment.

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Thus, if I was in-charge of the decision making process, I would go for DCF analysis because it allows me, as the owner, to see how much I would be making in the future and compare the figures to my current returns. As a result, if the future values fell above my firm’s relevant range, I would approve the additional shift. On the other hand, using regression analysis can enable me to ascertain whether the laboratory should hire more workers instead of working existing employees for longer hours

References
North Carolina State University (NCSU). (2014). Cost and Decision Making. [online]. Last accessed 24 August 25, 2014 at: http://www4.ncsu.edu/~rsawyers/webpage/acc220/Chapter5.pdf

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