New Heritage Doll Company

3645 Words Nov 20th, 2014 15 Pages
New Heritage Doll Company
Financial Assessment

Executive Summary New Heritage Doll Company’s production division has two serious proposals that will be presented to the capital budget committee. The first proposal, named Match My Doll Clothing Line extension, will add year round seasonal clothing to Heritage’s product line. This proposal’s NPV was $7,326.11. The IRR was 24.10% and the MIRR was 20.68%. The Profitability Index was 3.08 and the payback period was 7.11 years. The value of the tax shield is $647,000.
The second proposal, called Design Your Own Doll, is a new product line related to the heirloom line. It is one that will allow customers to customize the looks of the dolls they purchase through the New Heritage
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With constraints on financial and managerial resources, Emily Harris, vice president of New Heritage Doll Company’s production division, has a strong inclination that the capital budget committee will decline to approve both projects.
Two projects, named Match My Doll Clothing Line and Design Your Own Doll line, were of main concern for Emily Harris. The first focused mainly on expanding the line to include matching all-season clothing for tween girls and their favorite dolls. The second focused on a new initiative that would employ web-based doll-design software to let users customize a doll’s features to their own liking.
The Match My Doll Clothing line currently consists of a small selection of matching doll and child clothing sets for warm weather. Having become quickly successful after having been spotted in the hands of celebrities children’s arms, the brand manager of the line felt it was the perfect time for the line to expand.
The investment proposal contained a large outlay for R&D, market research, and marketing to maximize the profitability of quick acceptance and longer-term success for the follow-on line. The following are the upfront expenditures ($ thousands): R&D - $ 625, Upfront Marketing - $625, Investment in Working Capital - $ 800, Property, Plant & Equipment - $ 1,470, Total Investment - $3,520. R&D and marketing expenditures are deductible for

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