New Heritage Doll

Finally, in order to complete a more accurate comparison between the two projects, we utilized the EANPV as the deciding factor. Under current accepted financial practice, NPV is generally considered the most accurate method of predicting the performance of a potential project. The duration of the projects is different, one lasts four years and one lasts six years. To account for the variation in time frames for the projects and to further refine our selection we calculated the EANPV to compare performance on a yearly basis.

When choosing between projects with acceptable IRRs, the one with the highest IRR should be chosen.

Evaluating the risks, calculating the probability of success, and factoring in the projected profit from sales will provide a clearer NPV to be compared with other projects in the

Children’s child play has become a form of an unrealistic world. Although, it is considered for children to begin creating a creative imagination, the mind fascinates children into toys. Some child’s play toys are not ideal for young children, like the one and only “Barbie”. Barbie has become a worldwide toy product for children all over the world, from the North Pole to the South Pole. These dolls have emerged from one ethnicity to another. In Ann DuCille, “Dyes and Dolls: Multicultural Barbie and the Merchandising of Differences” the author talks about the race and gender differences; found in Barbie. She argues; “Is Barbie bad?” her response, was “Barbie is just a piece of plastic” (459). In contrast, this piece of plastic is not just a piece of plastic to young girls; it is much more than that. A piece of plastic that little girls all over the world wish they could be. Even though, it is only a piece of plastic to adults that Barbie significantly means nothing to them. Growing up, I owned a couple of Barbie dolls. The tall, long blond hair, blue-eyed doll was my best friend and my “role model”. I wanted to become exactly like Barbie. As a child, I thought only beautiful people who looked liked Barbie signified beauty. To my little to no knowledge, I soon came to find out no one really looks like Barbie, except people who want to become like Barbie. In my adolescent years, no one taught me Barbie was “unreal”; no one taught me it was just a figure in my imagination.

Net Present Value is one of the most commonly used to make the investment decision. Base on the data above, supplier C has the highest PV of $77,356.31 in total, supplier E has the second highest PV of $74,744.42; supplier E has the highest NPV of $19,744.42 and supplier C has the second highest NPV of $13,356.31. Considering these two figures, Supplier E comes down to be the best option. Looking further down the data be collected about supplier E, it can be seen that

Thus, by year three the company will be making a profit off the investment as year three is 86.73 million profit by 55.35 cost giving the company a 31.38 million dollar surplus. Generally, a period of payback of three year or less is acceptable (Reference Entry) causing this project to be viable based off the payback analysis. Although, these calculations are flawed. The reason for this is because the time value of money is not taken into effect when calculating payback periods which is where IRR can further assist in a more realistic financial picture (Reference Entry).

potential risk as the New Heritage was fundamentally a doll manufacturer. The support of the fashion

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

However, the number of items was limited. The proposed expansion would create an “All Seasons Collection” of apparel and gear covering all four season of the year. It would expand the number of matching doll and girl clothing items available

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

A target payback period will be set by the company and the proposals that recover their initial cost within this time will be acceptable. If a comparison is made between two or more options then the choice will be project with the fastest payback.

The use of an accounting rate of return also underscores a project 's true future profitability because returns are calculated from accounting statements that list items at book or historical values and are, thus, backward-looking. According to the ARR, cash flows are positive due to the way the return has been tabulated with regard to returns on funds employed. The Payback Period technique also reflects that the project is positive and that initial expenses will be retrieved in approximately 7 years. However, the Payback method treats all cash flows as if they are received in the same period, i.e. cash flows in period 2 are treated the same as cash flows received in period 8. Clearly, it ignores the time value of money and is not the best method employed. Conversely, the IRR and NPV methods reflect that The Super Project is unattractive. IRR calculated is less then the 10% cost of capital (tax tabulated was 48%). NPV calculations were also negative. We accept the NPV method as the optimal capital budgeting technique and use its outcome to provide the overall evidence for our final decision on The Super Project. In this case IRR provided the same rejection result; therefore, it too proved its usefulness. Despite that, IRR is not the most favorable method because it can provide false results in the case where multiple negative

2. Compute the NPV of both projects. Which would you recommend? What if they are not mutually exclusive?

3. The NPV method is better because it shows the size of the project so you can see how much value a project has not just a percentage. You could have a higher percentage but a much lower value and you would still go for the lower percentage.

All of the 11 projects are primarily ranked based on quantitative measurements. We have to also take into consideration of other quantitative aspects like length of the project, initial investment and anticipated payback period. Moreover, this