New Heritage Doll Company: Business Overview
Index
Executive summery………………………………………………………………………………………….…1
Introduction……………………………………………………………………………………………………….2
Case analysis Match My Doll Clothing……………………………..……………………….……….….………….2 Design Your Own Doll………………………………………………………………………………..3
Comparison……….…………………………………………………………………………..….………4
Additional Questions………………….………………………………………………………………………5
Recommendations……………………………………………………………………………………………..5
Appendix Appendix 1: calculation formulas, definitions and assumptions……………….6 Appendix 2: Exhibit 1 & 2………………………………………………………………………….9 Appendix 3: The NPV Profile…………………………………………………………………...11
Executive Summary
The production division at New Heritage Doll Company is considering between two business proposals to recommend at the firm’s upcoming capital budget meeting in October. In order to prioritize between the two projects, we needed to analyze both companies, quantitatively and qualitatively, to determine which proposal better suits NHDC’s goals.
Using a qualitative analysis, we analyzed both Match My Doll clothing line and compared it to the Design Your Own Doll proposal. We found, after comparing the strengths and weaknesses of both proposals, that MMDC’s business case is more compelling.
We then analyzed the financial aspect of both projects using the financial information given in the exhibit. In order to complete this analysis we began with a profitability analysis. First we computed the NPV, IRR and the profitability index in order to determine which of the projects would be more profitable. We found that although DYOD’s NPV was slightly higher, MMDC’s ratio’s seemed more compelling. We then moved on to a risk analysis, in order to compare the riskiness of the two projects. We found that not only is MMDC’s risk lower than that of DYOD, but its payback period was approximately 30% lower as well.
Based on these analyses, we recommend that the company should choose the Match My Doll Clothing line
Executive summery………………………………………………………………………………………….…1
Introduction……………………………………………………………………………………………………….2
Case analysis Match My Doll Clothing……………………………..……………………….……….….………….2 Design Your Own Doll………………………………………………………………………………..3
Comparison……….…………………………………………………………………………..….………4
Additional Questions………………….………………………………………………………………………5
Recommendations……………………………………………………………………………………………..5
Appendix Appendix 1: calculation formulas, definitions and assumptions……………….6 Appendix 2: Exhibit 1 & 2………………………………………………………………………….9 Appendix 3: The NPV Profile…………………………………………………………………...11
Executive Summary
The production division at New Heritage Doll Company is considering between two business proposals to recommend at the firm’s upcoming capital budget meeting in October. In order to prioritize between the two projects, we needed to analyze both companies, quantitatively and qualitatively, to determine which proposal better suits NHDC’s goals.
Using a qualitative analysis, we analyzed both Match My Doll clothing line and compared it to the Design Your Own Doll proposal. We found, after comparing the strengths and weaknesses of both proposals, that MMDC’s business case is more compelling.
We then analyzed the financial aspect of both projects using the financial information given in the exhibit. In order to complete this analysis we began with a profitability analysis. First we computed the NPV, IRR and the profitability index in order to determine which of the projects would be more profitable. We found that although DYOD’s NPV was slightly higher, MMDC’s ratio’s seemed more compelling. We then moved on to a risk analysis, in order to compare the riskiness of the two projects. We found that not only is MMDC’s risk lower than that of DYOD, but its payback period was approximately 30% lower as well.
Based on these analyses, we recommend that the company should choose the Match My Doll Clothing line