New Heritage Doll Company: Business Overview

Only available on StudyMode
  • Download(s) : 4579
  • Published : April 17, 2013
Open Document
Text Preview
Index

Executive summery………………………………………………………………………………………….…1

Introduction……………………………………………………………………………………………………….2

Case analysis
Match My Doll Clothing……………………………..……………………….……….….………….2
Design Your Own Doll………………………………………………………………………………..3 Comparison……….…………………………………………………………………………..….………4

Additional Questions………………….………………………………………………………………………5

Recommendations……………………………………………………………………………………………..5

Appendix
Appendix 1: calculation formulas, definitions and assumptions……………….6
Appendix 2: Exhibit 1 & 2………………………………………………………………………….9
Appendix 3: The NPV Profile…………………………………………………………………...11

Executive Summary

The production division at New Heritage Doll Company is considering between two business proposals to recommend at the firm’s upcoming capital budget meeting in October. In order to prioritize between the two projects, we needed to analyze both companies, quantitatively and qualitatively, to determine which proposal better suits NHDC’s goals. Using a qualitative analysis, we analyzed both Match My Doll clothing line and compared it to the Design Your Own Doll proposal. We found, after comparing the strengths and weaknesses of both proposals, that MMDC’s business case is more compelling. We then analyzed the financial aspect of both projects using the financial information given in the exhibit. In order to complete this analysis we began with a profitability analysis. First we computed the NPV, IRR and the profitability index in order to determine which of the projects would be more profitable. We found that although DYOD’s NPV was slightly higher, MMDC’s ratio’s seemed more compelling. We then moved on to a risk analysis, in order to compare the riskiness of the two projects. We found that not only is MMDC’s risk lower than that of DYOD, but its payback period was approximately 30% lower as well. Based on these analyses, we recommend that the company should choose the Match My Doll Clothing line expansion proposal.

Introduction
In this case study, two business proposals from the Production division of the New Heritage Doll Company (NHDC) are being considered for submission at the capital budgeting committee meeting which makes decisions at the corporate level for all large spending proposals. The first proposal is to extend the company’s Match My Doll Clothing line, and the second is to develop a new Design Your Own Doll product. Emily Harris, vice president of NHDC’s production division, is weighing the two proposals. Due to constraints on financial and managerial resources, it is possible that the committee will decline to approve both projects as other divisions of the company such as licensing and retail are also presenting projects that may prove more attractive to the committee. Harris has to be prepared to recommend only one of the projects. In order to evaluate which of the projects Emily should promote, we look at the criteria of the committee. They will examine the proposed project for consistency with the company’s overall business strategy and they will see if the project balances the needs and priorities of each division against the practical, financial, and organizational constraints of the company. The committee will evaluate whether the proposed project will strengthen the entire company, not just the particular division. We would try to evaluate which of the proposals based on the projects' qualitative and quantitative analysis. We have used in our analysis both the figures that were supplied by the line managers, and further information that seem relevant from online researches we had conducted. Match My Doll Clothing

This investment proposal is the expansion of the Match My Doll Clothing line (MMDC), an existing clothing line of matching doll and child clothing and accessories. The original line was a success, due to the strong identification that girls feel with their NH dolls. Due to the growing popularity of...
tracking img