New Heritage Dolls Case Analysis

1268 Words6 Pages
New Heritage Dolls Case Analysis The purpose of this paper is to evaluate two investment alternatives for New Heritage Dolls based on various capital budgeting criteria and to make a recommendation of one over the other. In this case, Emily Harris, VP of the production division is tasked with collecting the relevant information in order to make an informed decision on which project to present to the Capital Budgeting Committee. The committee examines each projects consistency with the company’s business strategy and seeks to balance the needs of each division against practical financial and organizational constraint. The first project involves expanding an existing “Match My Doll Clothing” line, which had a proven record of success in the past. The second project introduced a new initiative called “Design Your Own Doll”, which uses a web-based software enabling users to customize a doll’s features to the customers’ specifications. Using the operating projections for each project we estimated debt-free cash flows, calculated the Net Present Value, and estimated changes in net working capital based on provided assumptions. We also calculated IRR and payback period in order to find the value in each project. Looking at the financial analysis, relevance to company core values and beliefs, and the level of risk associated with each investment, we recommend 'Match My Doll Clothing' line. In-depth discussion and comprehensive numerical analysis will show why this project is the better value. Emily Harris, Vice President of New Heritage dolls had to make a decision before presenting a new project for the company's budgeting meeting. Two proposals stood out based on their potential to strengthen the division’s innovative product lines and drive future growth. The first project involved expanding an existing “Match My Doll Clothing” line, which had a proven

More about New Heritage Dolls Case Analysis

Open Document