...New Heritage Doll Company Financial Assessment Executive Summary New Heritage Doll Company’s production division has two serious proposals that will be presented to the capital budget committee. The first proposal, named Match My Doll Clothing Line extension, will add year round seasonal clothing to Heritage’s product line. This proposal’s NPV was $7,326.11. The IRR was 24.10% and the MIRR was 20.68%. The Profitability Index was 3.08 and the payback period was 7.11 years. The value of the tax shield is $647,000. The second proposal, called Design Your Own Doll, is a new product line related to the heirloom line. It is one that will allow customers to customize the looks of the dolls they purchase through the New Heritage Doll Company website by utilizing a new software program. This proposal has an NPV of $8,200.45. The IRR is 17.64% and the MIRR is 16.13%. It has a Profitability Index of 2.13 and a payback period of 10.11 years. The value of the tax shield for this project is $629,000. The screening of these projects was extensive and based on this analysis we recommend the Match My Doll Clothing line extension. Although the Design Your Own Doll Line has a higher NPV, it is not the key factor as to what we should use when picking one project over the other. It is important to factor in the IRR, MIRR, Payback Period, and the PI as well. Furthermore, we included the Value of the Tax Shield into our valuation of which project to choose. The Match My Doll Clothing...
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...New Heritage Doll Company: Capital Budgeting The New Heritage Doll Company’s Vice-President of Production, Emily Harris, had to decide which of two proposals she should approve for the company’s upcoming capital budgeting meetings. The first project involved expanding an existing “Match My Doll Clothing” line, which had a proven record of success in the past. The second project introduced a new initiative called “Design Your Own Doll”, which used a web-based software enabling users to customize a doll’s features to the customers’ specifications. To help Emily reach her decision, I will calculate the Net Present Value (NPV) of both projects to find out which project is more profitable. In the financial analysis of both projects Emily was given the following assumptions: 1. Operating projections were used to develop cash flow forecasts and then to calculate Net Present Value, Internal Rates of Return, payback period and other investment metrics. The cash flows excluded all financing charges and non-cash items (i.e. depreciation), and were calculated on an after-corporate-tax basis. The New Heritage’s corporate tax rate was 40% 2. Discount rate was set at 8.4% - for medium-risk project 3. NPV calculations included a terminal value computed as the value of a perpetuity growing at constant rate. I computed Free Cash Flows (FCF) to find out the actual amount of cash from operations that the company could use in developing its new projects. I calculated the terminal value...
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...The New Heritage Doll Company’s Vice-President of Production, Emily Harris, had to decide which of two proposals she should approve for the company’s upcoming capital budgeting meetings. The first project involved expanding an existing “Match My Doll Clothing” line, which had a proven record of success in the past. The second project introduced a new initiative called “Design Your Own Doll”, which used a web-based software enabling users to customize a doll’s features to the customers’ specifications. To help Emily reach her decision, I will calculate the Net Present Value (NPV) of both projects to find out which project is more profitable. In the financial analysis of both projects Emily was given the following assumptions: 1. Operating projections were used to develop cash flow forecasts and then to calculate Net Present Value, Internal Rates of Return, payback period and other investment metrics. The cash flows excluded all financing charges and non-cash items (i.e. depreciation), and were calculated on an after-corporate-tax basis. The New Heritage’s corporate tax rate was 40% 2. Discount rate was set at 8.4% - for medium-risk project 3. NPV calculations included a terminal value computed as the value of a perpetuity growing at constant rate. I computed Free Cash Flows (FCF) to find out the actual amount of cash from operations that the company could use in developing its new projects. I calculated the terminal value for 2020 as projected FCF in the first year...
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...Liacouras Walk Philadelphia, PA 19122 New Heritage Doll Company: Capital Budgeting Production Division Proposal Recommendation October 25, 2011 Prepared For: Jonathan Scott, President Emily Harris, Vice President Prepared By: Dylan Baird Brittany Brantley David Hamme Executive summary: Given the assumptions available to New Heritage for the forecast of their Match My Doll Clothing line (MMDC) and their Design Your Doll(DYOD) product line, we suggest New Heritage to proceed with MMDC. Despite less potential for exponential growth, MMDC is a much safer, yet more profitable, investment and does require the company to spend as much upfront. By constructing a forecast for the next ten years, we found that the MMDC expansion would have a higher NPV and IRR than the DYOD project. Furthermore, since MMDC requires a less amount for its initial investment than DYOD, it yields a higher profitability index, while having a smaller payback period. MMDC is less risky because it has less of a chance to incur a loss and will pay back the initial investment faster. If the discount rate is raised on the project, the NPV of the DYOD line decreases at a much faster rate than that of MMDC. Additionally, if the projected revenue is less than the forecast, DYOD will also suffer losses at a much faster rate than MMDC. Profitability: In analyzing the forecast for MMDC and DYOD we found that MMDC is a more profitable investment for New Heritage. The projections showed that both projects...
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...NEW HERITAGE DOLL COMPANY FINA 6278 Case 1 I. Executive Summary New Heritage Doll Company is a U.S based children toy manufacturer with a well-known national brand: the New Heritage. With its existing three divisions, New Heritage proposed two potential investment projects in order to expand its business while the doll industry was facing a relatively low growth rate. The first proposal is the Match My Doll Clothing line expansion, which is to expand a new clothing product line aimed at matching doll and child clothing and accessories covering all four seasons. While it has potential benefits with the current fashion trend of dressing the same between dolls and children, the New Heritage is facing a challenge of entering a new field and the doubt of being continuable project or not even with a success of the first sale of the cloth collection. The second proposal is a high-end product line which is called Design Your Own Doll that targets at the firm’s existing loyal customers who already held several heritage dolls. Such a project is appropriate with the company’s core business. However, it requires large amount of investment and longtime payback period. Considering the benefits and disadvantages of both the projects, the second proposal seems more compelling due to its match of firm’s core business, longer-term focus, and possibility to enhance customer loyalty. However, the question to expand customer pool was not answered yet. As a result, the second...
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...Financial Theory And Research Case Study on New Heritage Doll Company: Capital Budgeting Niweina Song Xin Gu Yao-‐Hsuan Yeh Huiyang Zhou Table of Contents Executive Summary ...................................................................................................................... 2 Evaluation Logic ............................................................................................................................ 2 Conclusion Analysis ...................................................................................................................... 3 Pros and Cons of the Recommended Action .................................................................................. 4 Analysis of the Match My Doll Clothing Line ................................................................................. 5 Analysis of the Design Your Own Doll Line ............................................................
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...2014,00 2010,00 Revenue Revenue Growth Production Costs Fixed Production Expense (excl depreciation) Variable Production Costs Depreciation Total Production Costs Selling, General & Administrative Total Operating Expenses 0,00 1250,00 1250,00 575,00 2035,00 152,20 2762,20 1155,00 3917,20 575,00 3403,80 152,20 4131,00 1735,00 5866,00 586,50 4290,60 152,20 5029,30 2102,20 7131,50 598,20 4669,00 152,20 5419,40 2270,30 7689,70 610,10 5078,40 164,40 5852,90 2452,00 8304,90 622,30 5521,30 177,50 6321,10 2648,10 8969,20 634,80 6000,30 191,70 6826,80 2860,00 9686,80 647,50 6518,50 207,10 7373,10 3088,80 10461,90 660,40 7078,80 223,60 7962,80 3335,90 11298,70 673,70 7684,70 241,50 8599,90 3602,80 12202,70 Operating Profit Operating Profit Operating Profit/Sales SG&A/Sales -1250,00 582,80 0,13 0,26 994,00 0,14 0,25 1277,30 0,15 0,25 1391,80 0,15 0,25 1503,10 0,15 0,25 1623,46 0,15 0,25 1753,27 0,15 0,25 1893,30 0,15 0,25 2045,00 0,15 0,25 2208,50 0,15 0,25 Working Capital Assumptions: Working Capital Assumptions: Minimum Cash Balance as % of Sales Days Sales Outstanding Inventory Turnover (prod. cost/ending inv.) Days Payable Outstanding (based on tot. op. exp.) NA NA NA 0,00 0,03 59,17 7,68 30,76 0,03 59,17 8,26 30,90 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 0,03 59,17 12,70 31,01 Minimum Cash Balance as % of Sales Days Sales Outstanding Inventory Turnover (prod. cost/ending...
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...APPROVALBOOK.COM Page 1 New Heritage Doll Company Capital Budgeting Solution NEW HERITAGE DOLL COMPANY CAPITAL BUDGETING SOLUTION New Heritage Doll Company Capital Budgeting Solution a great book which gives a great insight into the workings of a new heritage doll company capital budgeting solution. Clear descriptions of various systems within the new heritage doll company capital budgeting solution. Written from an american point of view but this doesn't really detract from a great book. This is a great book, filled with information for anyone interested in New Heritage Doll Company Capital Budgeting Solution. Great for students or beginners with clear information. I would definitely recommend this New Heritage Doll Company Capital Budgeting Solution book. Here The Access Download Page of NEW HERITAGE DOLL COMPANY CAPITAL BUDGETING SOLUTION : Sign up to download New Heritage Doll Company Capital Budgeting Solution Download or Read Online new heritage doll company capital budgeting solution in PDF format New Heritage Doll Company Capital Budgeting Solution Sign up to download New heritage doll company capital budgeting solution. Date shared: Mar, 20 2015 | Download and Read Online New Heritage Doll Company Case Study Solution Sign up to download New heritage doll company case study solution. Date shared: Mar, 02 2015 | Download and Read Online Heritage Doll Case Solution Sign up to download Heritage doll case solution. Date shared: Mar, 02 2015 | Download...
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...Christopher D. Huff 6/21/2016 Case 2 MBA 6368 New Heritage Doll Company Capital Budgeting Introduction The Vice President of the New Heritage Doll Company’s product division, Emily Harris, has decided to present two capital budget improvement proposals to the company’s capital budgeting committee in October. The purpose of the proposals is to provide the capital budgeting committee with a sound option that will make a positive impact on future company growth without hindering current operations and maneuverability. The purpose of this case is to decide which proposal is the most qualified proposal based on financial metrics and company goals. New Heritage Doll History and Profits Before evaluating each proposal it is important to understand the company New Heritage Doll and the toy industry itself so that we can make better assumptions for the case. New Heritage was established in 1985 by Ingrid Beckwith. Her vision for the company and those that purchased her products was simply to foster and grow a child’s ability to positively view their image and increase creativity. Her doll’s had an immediate impact on the industry which increased demand for New Heritage Doll products. Currently, the company receives operating profit from three divisions. The production division, the most asset heavy division, designs and produces dolls and doll accessories. In 2009, operation profit for the product division was 7.7 million. The retail division offers products through websites...
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...Risk considerations A major concern to be addressed in the New Heritage Doll case study is the risk, the two projects being evaluated having very different risk profiles. The strategy typically employed by New Heritage Company when assessing a projects’ risk is based on customer acceptance, technological uncertainty and high fixed costs. This note suggests an alternate strategy, trying to quantify the strategic growth potential for the New Heritage Doll Company of each project; therefore an integrated risk assessment approach based on both uncertainty and strategic and product positioning advantage delivered by each project will be used for project valuation. The “Match My Doll Clothing Line Expansion” project delivers an increment in the existing market segment by expanding the current warm weather clothing and accessories line, capitalizing on the popularity of the current offering and its premium pricing, having a similar risk profile as the current division business. The “Design Your Own Doll” project would deliver a “one-of-a-kind” doll ownership experience, and is expected to command the premium price associated with a custom doll. But more important, beside the new possibilities opened by the online customization of the dolls for expanding the current New Heritage market segment, the impact of the actual experience delivered by the girl interaction with the software while designing the doll should be further evaluated. This is a gaming-like experience that the project...
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...4212 SEPTEMBER 15, 2010 TIMOTHY LUEHRMAN HEIDE ABELLI New Heritage Doll Company: Capital Budgeting In mid-September of 2010, Emily Harris, vice president of New Heritage Doll Company’s production division, was weighing project proposals for the company’s upcoming capital budgeting meetings in October. Two proposals stood out based on their potential to strengthen the division’s innovative product lines and drive future growth. However, due to constraints on financial and managerial resources, Harris knew it was possible that the firm’s capital budgeting committee would decline to approve both projects. She also knew that New Heritage’s licensing and retail divisions would promote compelling projects of their own. Consequently, Harris had to be prepared to recommend one of her projects over the other. The Doll Industry Revenues in the U.S. toy and game industry totaled $42 billion in 2008 and were projected to increase by 4.6% per year to $52.5 billion by 2013. The market was divided into two broad segments: video games (48%) and traditional toys and games (52%). The second segment was further divided into infant/preschool toys (14.5%), dolls (14.1%), outdoor & sports toys (12.3%), and other toys & games (59.1%) including arts and crafts, plush toys, action figures, vehicles, and youth electronics. The U.S. market for toys and games was dominated by large global enterprises that enjoyed economies of scale in design, production, and distribution. Revenues...
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...Risk considerations A major concern to be addressed in the New Heritage Doll case study is the risk, the two projects being evaluated having very different risk profiles. The strategy typically employed by New Heritage Company when assessing a projects’ risk is based on customer acceptance, technological uncertainty and high fixed costs. This note suggests an alternate strategy, trying to quantify the strategic growth potential for the New Heritage Doll Company of each project; therefore an integrated risk assessment approach based on both uncertainty and strategic and product positioning advantage delivered by each project will be used for project valuation. The “Match My Doll Clothing Line Expansion” project delivers an increment in the existing market segment by expanding the current warm weather clothing and accessories line, capitalizing on the popularity of the current offering and its premium pricing, having a similar risk profile as the current division business. The “Design Your Own Doll” project would deliver a “one-of-a-kind” doll ownership experience, and is expected to command the premium price associated with a custom doll. But more important, beside the new possibilities opened by the online customization of the dolls for expanding the current New Heritage market segment, the impact of the actual experience delivered by the girl interaction with the software while designing the doll should be further evaluated. This is a gaming-like experience that the project...
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...The New Heritage Doll Company is founded in 1985 and has long history. The management of company pay attention to the doll developing girls’ the imagination and self-image. The company tends to create some new products to dominate the market. The U.S. retail sales of dolls totaled $3.1 billion in 2008 while the New Heritage Doll Company’s revenue approximately $245 million of revenue, owning less than 10% of market share. There is good reason to believe that the New Heritage Doll Company has a potential future. Based on this assumption, we assume the New Heritage Doll Company’s g (internal growth rate) is not less than 3%(average growth of U.S. dolls market). The data total case flow of 2021 in Exhibit 1, Exhibit 2 we provided are base on the assumption that the projects will be operated continuity whit a g = 3%. NPV , IRR & PI PV of Total CF | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Match My Doll Clothing | (3,020) | (501) | 145 | 533 | 391 | 390 | 389 | 387 | 386 | 384 | 383 | 6,747 | Design Your own Doll | (5,331) | (923) | 285 | (242) | (867) | 727 | 705 | 689 | 674 | 659 | 645 | 11,341 | | | | | | | | | | | | | | The initial expenditures of project Design Your own Doll will is more and the more total cash flow will be provided. We can find that * the NPV of Match My Doll Clothing = 6,615 the NPV of Design Your own Doll = 8,363 The project Design Your own Doll will create...
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...New Heritage Doll Company – Capital Budgeting Harvard Business School – Case 4214 The New Heritage Doll Company’s production division has been has given the responsibility of evaluating two proposals for new projects. The first project expands on a current “Match My Doll Clothing Line”, and the second involves creating a fully customized doll under the “Design Your Own Doll” proposal. Proposal Backgrounds Match My Doll Clothing Line Expansion (MMDCLE) The Match My Doll Expansion includes the further development of an already establish, successful doll line. The original line included limited outfits and accessories for warm weather only. It had become a popular line once celebrity children were photographed wearing the clothing and also when prevalent magazines showcased the items in the trendy clothing sections. The brand manager of this line has expressed her belief that this publicity will help the sales of the new “All Seasonal Collection” clothing take off. The new clothing expands the line from only warm weather apparel to clothing and accessories for all seasons. The supplier prices for the material to produce this clothing is low and will help the bottom line as selling price for the dolls/clothing can be at a premium due to the current buzz around the products. This line will also help end the seasonal sales that New Heritage has been experiencing due sales of only summer related items. The new expansion will however require high research and development...
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... | | |Loan Amount: | | |Interest Rate: | | INSTRUCTIONS: Congratulations! Your team is the newest addition to the loan committee at Barsema Hall Investment Bank (BHIB). The CEO of the New Heritage Doll Company has come to BHIB for a potential commercial loan to support future capital expenditures for their production, retail, and licensing divisions over the next five years. Your team has been charged with evaluating their financials and deciding whether to extend the loan, the maximum amount BHIB will lend, and at what interest rate. Review the foreground reading and company financials posted on Blackboard in the ‘Simulation’ section. You may also use other third party resources (i.e. Google searches, etc) if you feel it is helpful, but the materials provided on Blackboard take precedence in the case of conflicting information. Complete the executive summary, qualitative analysis, the financial statement analysis, and all questions in this worksheet using the foreground reading and the financial data for each firm posted on Blackboard. Each discussion response should be complete and self-supporting (one-line responses...
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