Corporate Finance

1635 WordsOct 2, 20137 Pages
Case 1 – New Heritage Doll Company 1. Set forth and compare the business cases for each of the two projections under consideration by Emily Harris. Which do you regard as more compelling? Productions was New Heritage´s largest division as measured by total assets, and easily its most asset-Intensive. Approximately 75 % of the division´s sales were made to the company´s retailing division, with the remaining 25% comprising private label goods manufactured for other firms. The division revenue figures include approximately $95 million of internal sales within divisions which are eliminated when considering consolidated revenue for the company. We must look closer on the financial projections and the operating details for the two…show more content…
In both cases the NPV is greater than zero but NPV of project 2 is greater than NPV of project 1, therefore project number 2 should be selected. | | | | | | | | | | | | NPV calculations for Design Your Own Doll | | | | | | | | | | | | | | | | | | | | | | | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | EBIT | -1201,00 | 0,00 | 550,00 | 1794,00 | 2724,00 | 2779,00 | 2946,00 | 3123,00 | 3310,00 | 3509,00 | 3719,00 | Tax @ 40% | -480,40 | 0,00 | 220,00 | 717,60 | 1089,60 | 1111,60 | 1178,40 | 1249,20 | 1324,00 | 1403,60 | 1487,60 | | | | | | | | | | | | | Net Income | -720,60 | 0,00 | 330,00 | 1076,40 | 1634,40 | 1667,40 | 1767,60 | 1873,80 | 1986,00 | 2105,40 | 2231,40 | plus: depreciation | 0,00 | 0,00 | 310,00 | 310,00 | 310,00 | 436,00 | 462,00 | 490,00 | 520,00 | 551,00 | 584,00 | less: ΔNWC | 0,00 | 1000,00 | 24,00 | 1386,00 | 942,00 | 202,00 | 213,00 | 226,00 | 240,00 | 254,00 | 269,00 | less: capital expenditures | 4610,00 | 0,00 | 310,00 | 310,00 | 2192,00 | 826,00 | 875,00 | 928,00 | 983,00 | 1043,00 | 1105,00 | | | | | | | | | | | | | Free Cash Flow (FCF) | -5330,60 | -1000,00 | 306,00 | -309,60 | -1189,60 | 1075,40 | 1141,60 | 1209,80 | 1283,00 | 1359,40 | 1441,40 | terminal value | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 0,00 | 27486,00 | FCF

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