New Heritage Dolls

New Heritage Doll Company Report

INTRODUCTION

New Heritage Doll Company is a firm that has ventured into Doll production which has sought to extend its brand in order to broaden its market framework and more importantly capitalise on high levels of customer loyalty. The vice president of the Company, Emily Harris is to forward her project proposal to the Budgeting Committee for evaluation. The Vice-president’s objective for proposing the project stood out based on potential to strengthen the Company’s division of production and to drive future growth. Emily Harris has to produce a compelling project to avoid the committee to decline the proposal.

Basis of assessment

There are two projects between which the company will have decision option to accept or drop the proposal. The method of project evaluation would be based on discounting cash flows (DCFs) and thereafter determining the Net Present value (NPV) of each of the proposed project. The project proposal with the positive and highest NPV would be acceptable for investment. If the project has a positive NPV suggests that such a project is generating more cash than is required to service the debt and to provide the appropriate returns to the firm’s shareholders and this cash accrues solely to the firm’s shareholders. If the firm projects generate a negative NPV then the project is not feasible.

New Heritage Doll Company managed to produce a capital budgeting structure in order to evaluate the revenue generated in the Doll industry. It is clearly evident that, a segment of the Doll industry generates the income progressively with an increasing rate of 4.6%. It is a project that has a going concern as illustrated;

The Doll industry Company revenues outlays: market for doll toy and game industry

year | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |

Cash outlays $(000) | 42 | 43.93 | 45.95 | 48.06 | 50..27 | 52.5 |

Cash flows forecast is used to capture the incremental effect of a proposed project...