New Heritage Doll

1489 WordsApr 22, 20146 Pages
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 warm weather products to an all-weather clothing line. The second project, Design your Own Doll (DYOD), would start with a website where customers would choose the doll’s features, color, etc. and then the dolls will be made to order. The…show more content…
The payback period looks at a project only until the costs have been recovered. This analysis tool is often ignored because it does not take into consideration the time value of money. The time value of money limitation of the payback period can be modified by using the discounted cash flows of a project for the analysis of when the outflows will be recovered. To make the most informed decision the IRRs and payback periods of the projects should be compared in conjunction with the NPVs of the two projects. The NPV analysis of the two projects under consideration indicates that the MMDC Project is the better of the two projects. 4. What additional information does Harris need to complete her analyses and compare the two projects? What specific questions should she ask each of the project sponsors? When comparing the two projects other than comparing the NPV and IRR of each project Harris will need to look at other factors as well. Among the factors that should be considered along with the NPV and IRR, are the manufacturing capabilities, the company’s core competencies, and ensuring that the project aligns with the company’s corporate strategy. With this being said the DYOD Project is at a disadvantage because the MMCD Project is already a successful operation which allows Harris to analyze the historical data as opposed to the project projections of DYOD. Using the factual data provided by MMCD is a less risky option for

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