Southern New Hampshire University FIN-630 Capital Budgeting & Financing 9-1 Final Project Submission: Capital Budgeting Case Report Justin Hardy 9/3/2023
Executive Summary The production division of the New Heritage Doll Company is currently evaluating two competing investment opportunities, both of which will be presented to the capital budget committee by Emily Harris. The first investment opportunity, known as the "Match My Doll Clothing Line," involves expanding the company's product line to include year-round seasonal children's clothing and accessories. This proposal currently boasts a Net Present Value (NPV) of $7,149.29, an Internal Rate of Return (IRR) of 31.03%, a Probability Index of 2.37, and a payback period of 7.40 years. The second investment opportunity, named "Design Your Own Doll," introduces a new product line focused on the company's heirloom dolls. The aim is to create customizable dolls tailored to individual customer preferences, providing a unique and personalized experience through the company's proprietary design software. This initiative addresses the demand for dolls that resemble the customer themselves. The customization process will be facilitated through a dedicated section on the company's website, where the proprietary design software allows customers to select various physical attributes for the dolls, such as hair color, length, style, skin tone, eye shape, and color, among other facial features. The second proposal carries an NPV of $9,198.44, an IRR of -1.45%, a profitability index of 0.93, and a payback period exceeding 10 years.After conducting a thorough analysis of these two investment opportunities, Emily Harris should recommend pursuing the "Match My Doll Line Extension." While the "Design Your Own Doll" line has a higher NPV, this isn't the sole determining factor in Emily's decision-making process. Other critical factors, including internal rate of return, payback period, and modified internal rate of return, must be considered. The "Match My Doll Line" outperforms its competitor in every
category, with the exception of NPV. This is the rationale behind Emily's choice to proceed with the "Match My Doll Line Extension." Background In the year 1985, New Heritage Doll Company came into existence, founded by the visionary Ingrid Beckwith. This company emerged as a specialized manufacturer and retailer of dolls, setting out on a remarkable journey that would eventually lead to significant growth and success. Fast-forwarding through the years, New Heritage Doll Company has not only expanded its operations but has also become a formidable player in the industry, now boasting a formidable workforce comprising over 450 employees. In 2009, it achieved a remarkable milestone, with its annual revenue reaching an impressive $245 million. What has been central to New Heritage Doll Company's enduring vision is the unwavering conviction of its founder, Ingrid Beckwith. She held a profound belief that the dolls available in the market at the time had a somewhat limited positive impact on the self-image and development of young girls who cherished them as their companions. Beckwith was determined to address this shortfall by conceiving and crafting dolls that transcended the ordinary. These dolls were envisioned not just as playthings but as vehicles for storytelling, with the aim of creating a deeper and more meaningful connection with young girls. Furthermore, quality and customizability were at the core of this vision, ensuring that every doll produced by the company would be a work of art.Yet, New Heritage Doll Company's journey has not been without its fair share of challenges, particularly in the fiercely competitive market segment it occupies. The doll industry, while beloved and highly popular, ismarked by intense competition, demanding constant innovation and adaptation to stay ahead.To surmount this challenge and
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