179625798 NHDC Solution xls
New Heritage Doll Company: Capital Budgeting
Teaching Note
NPV Analysis for Match My Doll Clothing Line Extension
TN Exhibit 1
2010
Revenue
2011
4,500
2012
2013
2014
2015
2016
2017
2018
2019
2020
9,082
9,808
10,593
11,440
12,355
13,344
14,411
6,860
8,409
52.4%
22.6%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
575
575
587
598
610
622
635
648
660
674
2,035
3,404
4,291
4,669
5,078
5,521
6,000
6,519
7,079
7,685
0.4522
0.4962
0.5103
0.5141
0.5178
0.5212
0.5245
0.5276
0.5305
0.5332
152
152
152
152
164
178
192
207
224
242
0
2,762
4,131
5,029
5,419
5,853
6,321
6,827
7,373
7,963
8,600
Selling, General & Administrative
1,250
1,155
1,735
2,102
2,270
2,452
2,648
2,860
3,089
3,336
3,603
Total Operating Expenses
1,250
3,917
5,866
7,132
7,690
8,305
8,969
9,687
10,462
11,299
12,203
583
994
1,277
1,392
1,503
1,623
1,753
1,893
2,045
2,209
Operating Profit/Sales
0.130
0.145
0.152
0.153
0.153
0.153
0.153
0.153
0.153
0.153
SG&A/Sales
0.257
0.253
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Revenue Growth
NA
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Operating Profit
(1,250)
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
NA
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
Days Sales Outstanding
NA
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
Inventory Turnover (prod. cost/ending inv.)
NA
7.7x
8.3x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
0.0x
30.8x
30.9x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
952
152
152
334
361
389
421
454
491
530
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures
1,470
Growth in capex
Net Working Capital Accounts
Cash
Accounts Receivable
Inventory
Accounts Payable
Net Working Capital
DNWC
2010
800
800
-35.2% -84.0%
0.2116
Teaching Note
NPV Analysis for Match My Doll Clothing Line Extension
TN Exhibit 1
2010
Revenue
2011
4,500
2012
2013
2014
2015
2016
2017
2018
2019
2020
9,082
9,808
10,593
11,440
12,355
13,344
14,411
6,860
8,409
52.4%
22.6%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
575
575
587
598
610
622
635
648
660
674
2,035
3,404
4,291
4,669
5,078
5,521
6,000
6,519
7,079
7,685
0.4522
0.4962
0.5103
0.5141
0.5178
0.5212
0.5245
0.5276
0.5305
0.5332
152
152
152
152
164
178
192
207
224
242
0
2,762
4,131
5,029
5,419
5,853
6,321
6,827
7,373
7,963
8,600
Selling, General & Administrative
1,250
1,155
1,735
2,102
2,270
2,452
2,648
2,860
3,089
3,336
3,603
Total Operating Expenses
1,250
3,917
5,866
7,132
7,690
8,305
8,969
9,687
10,462
11,299
12,203
583
994
1,277
1,392
1,503
1,623
1,753
1,893
2,045
2,209
Operating Profit/Sales
0.130
0.145
0.152
0.153
0.153
0.153
0.153
0.153
0.153
0.153
SG&A/Sales
0.257
0.253
0.250
0.250
0.250
0.250
0.250
0.250
0.250
0.250
Revenue Growth
NA
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Operating Profit
(1,250)
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
NA
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
Days Sales Outstanding
NA
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
59.2x
Inventory Turnover (prod. cost/ending inv.)
NA
7.7x
8.3x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
12.7x
0.0x
30.8x
30.9x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
31.0x
952
152
152
334
361
389
421
454
491
530
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures
1,470
Growth in capex
Net Working Capital Accounts
Cash
Accounts Receivable
Inventory
Accounts Payable
Net Working Capital
DNWC
2010
800
800
-35.2% -84.0%
0.2116