ASSIGNMENT TOPIC: “THE ADVANTAGES AND DISADVANTAGES OF USINFG NPV (NET PRESENT VALUE) AND IRR (INTERNAL RATE OF RETURN)” NPV (NET PRESENT VALUE) The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. NPV compares the value of a dollar today to the value of that
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New Heritage Doll 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
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New Heritage Doll Case Analysis 3/29/2013 Introduction Emily Harris is the Vice president of New Heritage Doll Company’s production division. In mid-September of 2010 she was trying to decide on project proposals for the company’s capital budget meeting in October. Of the proposals presented to her‚ two of them stood out based on their innovation and ability to strengthen the division’s product lines. The first project‚ Match My Doll Clothing Line Expansion (MMDC)‚ would extend the
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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
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NPV Versus IRR W.L. Silber I. Our favorite project A has the following cash flows: -1000 0 0 1 0 2 +300 3 +600 4 +900 5 We know that if the cost of capital is 18 percent we reject the project because the net present value is negative: - 1000 + 300 600 900 + + = NPV 3 4 (1.18) (1.18) (1.18)5 - 1000 + 182.59 + 309.47 + 393.40 = -114.54 We also know that at a cost of capital of 8% we accept the project because the net present value is positive: - 1000 + 300 600 900
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Investment appraisal is the planning process used to determine whether an organization’s long term investments such as new machinery‚ replacement machinery‚ new plants‚ new products‚ and research development projects are worth pursuing. It is budget for major capital‚ or investment‚ expenditures. Many formal methods are used in capital budgeting‚ including the techniques such as 1. Accounting rate of return 2. Net present value 3. Profitability index 4. Internal rate of return
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DATE: October 27‚ 2014 SUBJECT: New Heritage Doll Company The New Heritage Doll Company is a growing company within the U.S. toy and game industry‚ with two proposals to strengthen future growth‚ but only the resources to dedicate themselves to one according to the capital budgeting committee. Match My Doll Clothing line has lower initial costs‚ but projects lower operating profit. Design Your Own Doll‚ on the other hand‚ has double the initials costs‚ but shows much higher revenues along with
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New Heritage Doll Company 1. Describe and compare the business rationales for each of the two project proposals under consideration. Which do you feel is the more compelling? Project 1: Match My Doll Clothing Line Expansion Expand the successful Match My Doll Clothing Line to include matching all-season clothing for tween girls and their dolls. Pros: Current popularity will enable company to maintain premium prices. Company could take advantage of off-peak discounts offered by some suppliers
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Seoul Journal of Business Volume 19‚ Number 1 (June 2013) Behavioral Finance: A Survey of the Literature and Recent Development HYOYOUN PARK*1) Euler Hermes Hong Kong Service Hong Kong‚ China WOOK SOHN** KDI School of Public Policy and Management Seoul‚ Korea Abstract This paper summarizes recent studies in behavioral finance—particularly regarding market anomalies and investor behavior—that are not reconciled with the traditional finance paradigms. This paper differs from previous
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Exhibit 1 Selected Operating Projections for Match My Doll Clothing Line Expansion 2010 Revenue Revenue Growth Production Costs Fixed Production Expense (excl depreciation) Variable Production Costs Depreciation Total Production Costs Selling‚ General & Administrative Total Operating Expenses Operating Profit 2011 4‚500.00 2012 6‚860.00 52.44% 0.00 1‚250.00 575.00 2‚035.00 152.20 2‚762.20 1‚155.00 575.00 3‚403.80
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