New Heritage Doll Company Write Up
Marina Chmykhalo-Friermood
Professor N. Cohen
FINA 6273-Section 10
October 23, 2014
New Heritage Doll Company Write-up
Introduction
New Heritage Doll Company is a firm that has ventured into doll production which has sought to extend its brand in order to broaden its market framework and more importantly capitalize on high levels of customer loyalty. The vice president of the Company, Emily Harris, is to forward her project proposal to the Budgeting Committee for evaluation. The Vice-president’s objective for proposing the project was based on potential to strengthen the Company’s division of production and drive future growth. Emily Harris has to produce a compelling project to avoid the committee from declining the proposal.
Basis of Assessment
There are two projects between which the company can choose from or drop the proposals in their entirety. The methods of project evaluation would be based on discounting cash flows analysis and thereafter determining the Net Present Value (NPV) of each of the proposed project with Internal Rate of Return (IRR), Profitability Index and Payback Period. If the project has a positive NPV, it would suggests the project is generating more cash than is required to service the debt and provide the appropriate returns; thus, the higher NPV, the better it is for the company. The project proposal with the positive and highest NPV, IRR and profitability index along with the shortest payback period would be acceptable for investment.
New Heritage Doll Company managed to produce a capital budgeting structure in order to evaluate the revenue generated in the Doll industry. It is clearly evident that a segment of the Doll industry generates income progressively with an increasing rate of 4.6%. Cash flows forecast is used to capture the incremental effect of a proposed project in order to acknowledge the breakeven point and profit or loss time frame. If the company continues with its investment in the toy and game segment, it is going
Professor N. Cohen
FINA 6273-Section 10
October 23, 2014
New Heritage Doll Company Write-up
Introduction
New Heritage Doll Company is a firm that has ventured into doll production which has sought to extend its brand in order to broaden its market framework and more importantly capitalize on high levels of customer loyalty. The vice president of the Company, Emily Harris, is to forward her project proposal to the Budgeting Committee for evaluation. The Vice-president’s objective for proposing the project was based on potential to strengthen the Company’s division of production and drive future growth. Emily Harris has to produce a compelling project to avoid the committee from declining the proposal.
Basis of Assessment
There are two projects between which the company can choose from or drop the proposals in their entirety. The methods of project evaluation would be based on discounting cash flows analysis and thereafter determining the Net Present Value (NPV) of each of the proposed project with Internal Rate of Return (IRR), Profitability Index and Payback Period. If the project has a positive NPV, it would suggests the project is generating more cash than is required to service the debt and provide the appropriate returns; thus, the higher NPV, the better it is for the company. The project proposal with the positive and highest NPV, IRR and profitability index along with the shortest payback period would be acceptable for investment.
New Heritage Doll Company managed to produce a capital budgeting structure in order to evaluate the revenue generated in the Doll industry. It is clearly evident that a segment of the Doll industry generates income progressively with an increasing rate of 4.6%. Cash flows forecast is used to capture the incremental effect of a proposed project in order to acknowledge the breakeven point and profit or loss time frame. If the company continues with its investment in the toy and game segment, it is going