...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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...Asg 1 Ch 1-7 The majority of this assignment involves the case New Heritage Doll Company: Capital Budgeting. Please download from website listed in the syllabus. 1) Compare and contrast the business case for each of the two projects being considered. Which do you regard as a more compelling investment from a strategic view? 2) Using the projections given compute the NPV for each project. Create a data table comparing the NPV for each of the discount rates (low, medium, high risk). Which project creates more value? Create a data table comparing the NPV at different terminal growth rates (from 0% to 6% in .5% increments) 3) Compute the IRR of each project. How should these projections effect the deliberations? How does IRR compare to NPV as a tool for evaluating projects? When and how should it be used? 4) Why does the case give three different costs of capital? How do companies determine their cost of capital? Explain why a company may have a company wide cost of capital and a different cost of capital for a specific project. Cost of capital is the company's cost of using funds provided by creditors and shareholders. Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate This case includes three costs of capital cost of debt, cost of equity and cost...
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...Dylan Steele Professor Elhaj New Heritage Doll Company March 16th 2016 Case Memo This case study was very interesting, and challenging because of the choice that had to be made between the two successful companies. The two investment projects New Heritage had to choose between were Design Your Own Doll and Match My Doll Clothing Line Expansion. After studying the case and figuring out some numbers without going to in depth, Match My Doll Clothing Line Expansion was more compelling at first. To begin, I used the total cost of initial expenditures that was given to appraise the two projects in order to see which one was more feasible. The four variables used in table 2 & 3 to find the total cost were initial expense, upfront R&D, plant property and equipment, and the investment in working capital. Design Your Own Doll had a higher total cost of $2291 in capital expenditures. Therefore, Match My Doll was more compelling at first glance since it had less capital invested on it. The capital budgeting decision criteria gives us plenty of information to help with the decision. After looking at variables in the criteria my decision to choose Match My Doll at first reformed toward Design Your Own Doll. Some of the strengths for Design Your Own Doll are its operating profit and its growth in revenue over its ten-year life. The first year after production, Design Your Doll’s growth in revenue was up 139.3%. After year 2015, its growth leveled off to 6% in perpetuity compared...
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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 Analysis The New Heritage Doll Company is a company that makes dolls for children between the ages 3 – 12 years. The company has revenues of 245 million USD and an operating profit of 24 million USD. The company has three major divisions – The Retailing division, the Licensing division and the Production division. The head of the production division has to choose between two capital intensive projects that have been presented to her - the “Make My Doll Clothing Extension” (MMDCE henceforth) and the “Design Your Own Doll” (DYOD henceforth). This paper will try and analyze some of the issues that may need to be taken into account by the division head before she chooses a project for final approval. Issue 1: Product Line Growth Rate vs Industry Growth Rate The doll segment in the US is slated to grow at 3% in 2013 and lasting franchise value for branded lines of dolls is considered rare – most doll lines lose their popularity within a few years of launch. Given this reality, the underlying assumption of the two brand managers for the two projects is, in my opinion, quite optimistic. The MMDCE line is expected to grow at 8% while the DYOD line is expected to grow at 6% - which is much higher than the expected rate of growth in the dolls segment. The production head must, in my opinion, do due diligence and consider if the growth rates for these product lines can exceed the average industry growth rate by such a large extent. Issue 2: Possibility...
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...| | |NIKE Inc. | |Transition to Transnationality: A Strategic and Structural Outlook | | | | | | | | | | | | | | | | ...
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...New Heritage Doll Company: Capital Budgeting Match my doll clothing line expansion 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ingresos 4,500 6,860 8,409 9,082 9,808 10,593 11,440 12,355 13,344 14,411 Crecimiento de Ingresos 52.4% 22.6% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% Costos de Producción Gastos Fijos de Producción (sin depreciación) 575 575 587 598 610 622 635 648 660 674 Costos Variables de Producción 2,035 3,404 4,291 4,669 5,078 5,521 6,000 6,519 7,079 7,685 Depreciación 152 152 152 152 164 178 192 207 224 242 Total de Costos de Producción 0 2,762 4,131 5,029 5,419 5,853 6,321 6,827 7,373 7,963 8,600 Gastos de Ventas, Generales y Administrativos 1,250 1,155 1,735 2,102 2,270 2,452 2,648 2,860 3,089 3,336 3,603 Total de Gastos Operativos 1,250 3,917 5,866 7,132 7,690 8,305 8,969 9,687 10,462 11,299 12,203 Utilidad de Operación -1,250 583 994 1,277 1,392 1,503 1,623 1,753 1,893 2,045 2,209 Supuestos de Capital de Trabajo Saldo minimo de caja como % de Ventas 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Días pendientes de venta 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 Rotación de Inventarios 7.7 8.3 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7 Días pendientes de pago (basado en gastos de operación) 30.8 30.9 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 ...
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...New Heritage Doll New Heritage Doll Company: Capital Budgeting MGT 6060 20 September 2011 Overview Two business proposals from the Production division of the New Heritage Doll Company are being considered for submission to the capital budgeting committee. Only one proposal will be submitted. The proposals are: Match My Doll Clothing Line Expansion and Design Your Own Doll. A systematic process will be used to determine which proposal to recommend. Criteria Include: 1. Comparison of the business cases 2. NPV analysis 3. IRR and payback period analysis 4. Analysis of additional information 5. Recommendation Comparison of the Business Cases Most Compelling Business Case Match My Doll Clothing Line Expansion Match My Doll Clothing Line Expansion is the the most compelling opportunity. This initial recommendation is based solely on a qualitative comparison of the cases and the financial exhibits provided by the brand managers. A SWOT (Strength, Weakness, Opportunity, & Threat) analysis was used to aid the decision process. See Tables 1 & 2 for SWOT analysis. Benefits of the Match My Doll Clothing Line Expansion: * Success of the original line of business * Utilization of the businesses existing strengths * Long term ability for the product to stay up to date and drive business Concerns for the Design Your Own Doll: * High risk associated with developing a proprietary software system * Complexity of manufacturing * High break-even sales volume Overview Business...
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...New Heritage Doll Company: Capital Budgeting MGT 6060 20 September 2011 Overview Two business proposals from the Production division of the New Heritage Doll Company are being considered for submission to the capital budgeting committee. Only one proposal will be submitted. The proposals are: Match My Doll Clothing Line Expansion and Design Your Own Doll. A systematic process will be used to determine which proposal to recommend. Criteria Include: 1. Comparison of the business cases 2. NPV analysis 3. IRR and payback period analysis 4. Analysis of additional information 5. Recommendation Comparison of the Business Cases Most Compelling Business Case Match My Doll Clothing Line Expansion Match My Doll Clothing Line Expansion is the the most compelling opportunity. This initial recommendation is based solely on a qualitative comparison of the cases and the financial exhibits provided by the brand managers. A SWOT (Strength, Weakness, Opportunity, & Threat) analysis was used to aid the decision process. See Tables 1 & 2 for SWOT analysis. Benefits of the Match My Doll Clothing Line Expansion: * Success of the original line of business * Utilization of the businesses existing strengths * Long term ability for the product to stay up to date and drive business Concerns for the Design Your Own Doll: * High risk associated with developing a proprietary software system * Complexity of manufacturing * High break-even sales...
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...New Heritage Doll Company: Capital Budgeting Solution Sheet 1 NPV Analysis for Match My Doll Clothing Line Extension 2010 2011 4 500 NA 2012 6 860 52,44% 2013 8 409 22,58% 2014 9 082 8,00% 2015 9 808 8,00% 2016 10 593 8,00% 2017 11 440 8,00% 2018 12 355 8,00% 2019 13 344 8,00% 2020 14 411 8,00% 0 1 250 1 250 575 2 035 152 2 762 1 155 3 917 575 3 404 152 4 131 1 735 5 866 587 4 291 152 5 029 2 102 7 132 598 4 669 152 5 419 2 270 7 690 610 5 078 164 5 853 2 452 8 305 622 5 521 178 6 321 2 648 8 969 635 6 000 192 6 827 2 860 9 687 648 6 519 207 7 373 3 089 10 462 660 7 079 224 7 963 3 336 11 299 674 7 685 242 8 600 3 603 12 203 -1 250 583 994 1 277 1 392 1 503 1 623 1 753 1 893 2 045 2 209 3,0% 59,2x 7,7x 30,8x 3,0% 59,2x 8,3x 30,9x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 3,0% 59,2x 12,7x 31,0x 952 152 152 334 361 389 421 454 491 530 2011 135 729 360 317 907 107 20,15% 2012 206 1 112 500 484 1 334 427 19,45% 2013 252 1 363 396 593 1 418 84 16,87% 2014 272 1 472 427 640 1 531 113 16,86% 2015 294 1 590 461 692 1 653 122 16,86% 2016 318 1 717 498 747 ...
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...Universidad Adolfo Ibáñez Caso: New Heritage Doll Company María Eliana Errázuriz Raimundo Muñoz Josefina Olivera Antonio Poblete Luis Felipe Santa María 1. Presente y compare los argumentos de negocio para las dos proyecciones que Emily Harris está evaluando. ¿Cuál le parece más atractiva? La empresa tiene dos opciones realizar el proyecto “Match My Doll Clothing” o el proyecto “Design Your Own Doll”. En términos de costos, la primera alternativa tiene costos mucho menores, 3.520 versus 5.811 millones de dólares. Por lo tanto, tiene un riesgo moderado y representa la opción más segura para la compañía. Sin embargo, el segundo proyecto está más alineado a la estrategia y objetivos de la empresa y promete ingresos futuros mucho ...
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...1. Compute the Free Cash Flows for the years 2010 to 2020 for both projects See excel File attached. Assumptions: * We assumed the required working capital in table 2 and 3 is the amount required in 2010, for further years we computed the WCR based on the ratio’s of minimum cash balance, number of days sales outstanding, inventory turnover and days payable outstanding (deducting the depreciation as instructed) * We assumed the SG&A and fixed production costs were project specific and therefore included them in the FCF analysis 2. Compute the NPV of both projects. Which would you recommend? What if they are not mutually exclusive? NPVMMDC = 7,150 NPVDYOD = 7,298 Based solely on the NPV analysis we would suggest to implement the DYOD project as it has a higher NPV. If both projects weren’t mutually exclusive, we would suggest implementing both as both have a positive NPV. 3. Compute IRR and payback period for both projects. Based on each criterion, which project would you recommend? If this differs from NPV analysis, explain the deviation? For MMDC: IRR = 23,99%* Payback period = 8 years (assuming the cash flows occur at year end, as instructed) For DYOD: IRR = 18,33%* Payback period = 11 years (assuming the cash flows in 2021 is indeed CF2020*1,03) *For the IRR analysis we drafted a NPV sensitivity graph in order to make sure that there are not 2 possible values for IRR. These graphs are to be found in the excel file attached...
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...Authors Book Series 'Best of Girls' books were an immediate success with the targeted demographic. Both revenue and profit levels exceeded expectations. 2012 EDI Supplier Software System The new system performed better than expected with regard to SG&A and working capital savings. Expansion to England Boutique sales were stronger than expected, due in large part to the success of 'Dolls of the World' in Europe. Bookstore Café and Writers' Club Initial revenues from the initiative were somewhat higher than expected, but this was offset by lower gross margins resulting from a somewhat different product mix than anticipated. Toddlers Music CD Series Initial revenues from Toddler CDs were twice as large as anticipated. 2011 Replace Assembly Equipment at Sacramento Facility The new machinery performed as expected. 'Match My Doll' Clothing Line, Expansion of Concept The expanded clothing line benefited from the strong performance of the initial 'Match My Doll' line and has outperformed projections. Acquisition of Electronic Toy Manufacturer The acquired business is profitable but performing below the investment case. A few key distributors declined to renew contracts, and future sales growth is threatened. New Inventory Control System for Warehouse Inventory savings associated with the new system were marginally greater than projected. Tween Book Series The...
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...“Everyday Use” Alice Walker clearly depicts two contrasting meanings of heritage through characterization and symbolism of her two daughters, walker highlights the difference between two interpretations of African American culture and heritage. The gist of the story in “Everyday Use” is how mama bit by bit rejects the superficial beliefs of Dee, her older and extraordinary daughter in admiration of the values about heritage from her less fortunate daughter Maggie. With a more profound thought walker is going into the contrasting culture and heritage of African Americans and superficial African Americans. Mama narrates the story, Ms. Johnson or “Mama” is a woman whose everyday life is part of her culture and heritage. Mama describes herself as, “a large, big-boned woman with rough, man working hands. In the winter I wear flannel nightgowns to bed and overalls during the day. I can kill a hog as mercilessly as a man”(155). With knowing that only has a second grade education we can say that she has no choice but to follow tradition and heritage, and stay in the home like she grew up in and work the field as other before her did. Even as mama is more or less forced to do so, still she has a great understanding and value of the concept of heritage and culture. In knowing Mama’s love and compassion for her heritage she gives the quilts to Maggie, because Dee wants the quilts to preserve and display her heritage of her ancestors. Mama gives the quilts to Maggie because Mama knows that...
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...place at Mama’s house primarily with the exception of a flashback to their old house that burned down. The plot of the story reveals the characters cultural pride and ignorance towards the changing times. The themes in “Everyday Use” are, the meaning of heritage and the power of education. Additionally, the author creates different conflicts that arise throughout the story in which they are: man vs. man, man vs. society, and man vs. himself. Man vs. Man is first seen between Dee and Mama due to the fact that Mama doesn’t meet up to Dee’s standards. This coincides with the theme, power of education. Mama struggled to send Dee to a good school, which could have ended up doing more harm than good in regards to their relationship. Mama herself was denied an education and her youngest daughter Maggie lacks in that department. Therefor, giving Dee the advantage of being the only one educated which makes her arrogant and condescending. The education that Mama generously gave to Dee only created a bigger wedge between them and the family. Dee with her knowledge and way of the world becomes a bit of a threat to the standards of Mama and Maggie. When Dee arrives back home with Hakim-a-barber she engulfs Mama and Maggie with her new found knowledge, making them feel like children. Even when Dee was a child, Mama says “She used to read to us without pity; forcing words, lies, other folks’ habits, whole lives upon us two, sitting trapped and ignorant underneath her voice.” (Walker, pg...
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