New Heritage Doll Capital Budgeting

New Heritage Doll Company: Capital Budgeting Exhibit 1 )ele$ted -perating #ro9e$tion% or  Match My My Doll Clothing  Clothing  ;ine  ;ine 2010 Revenue

2011 !"00

Revenue Growth #rodu$tion Co%t%

Fixed Production Expense (excl depreciation)

575

Variable Production Costs

2!"5

#epreciation

$52

&otal #rodu$tion Co%t%

0

2!'(2

)elling! *eneral + ,dmini%trative

1!2"0

1!1""

&otal -perating Expen%e%

1!2"0

.!/1'

1!2"0

"3.

-perating #roit

Working Capital Assumptions: %ini&u& Cash 'alance as  o *ales

"+!

#a,s *ales -utstandin.

5/+2x

0nventor, 1urnover (prod+ costendin. inv+)

7+7x

#a,s Pa,able -utstandin. (based on tot+ op+ exp+)

"!+3x

Capital Expenditures

4or5ing Capital

Cash

$47!

/52

2010

2011

!

$"5+!!

ccounts Receivable

72/+4/

0nventor,

"5/+66

ccounts Pa,able

"$7+2/

1otal et 8or9in. Capital

3!!

/!6+36

0

10(63(

2010

2011

;75!

"4/+63

#epreciation (shown above)

!

$52

%inus chan.e o etwor9in. Capital

!

;$!6+36

#elta o et 8or9in. Capital -perating Ca%hlow

 et -peratin. Proit ater ater 1axes 1axes (E'01 :($; 4! 1ax 1ax Rate))

%inus Capital Expenditures < 0nitial -utla,

!

1otal =earl, Cash Flow

(/52)

;75!+!!

;557+"3

2010

2011

;75!+!!

;557+"3

N#7 Cal$ulation + ,naly%i% Final Cashlows 0nitial -utla, ; PP
($47!) ;222!+!!

#iscount Rate or %ediu& Ris9 Pro>ect Net #re%ent 7alue o the 88DC #ro9e$t

3+4! (0.603

;557+"3


12=

 

Expan%ion 2012

201.

201

201"

201(

(!3(0

3!0/

/!032

/!303

10!"/.

52+4

22+6

3+!

3+!

3+!

575

537

5/3

6$!

622

"4!4

42/$

466/

5!73

552$

$52

$52

$52

$64

$73

!1.1

"!02/

"!1/

"!3".

(!.21

1!'."

2!102

2!2'0

2!"2

2!(3

"!3((

'!1.2

'!(/0

3!.0"

3!/(/

//

1!2''

1!./2

1!"0.

1!(2.

"+!

"+!

"+!

"+!

"+!

5/+2x

5/+2x

5/+2x

5/+2x

5/+2x

3+"x

$2+7x

$2+7x

$2+7x

$2+7x

"!+/x

"$+!x

"$+!x

"$+!x

"$+!x

$52

$52

""4

"6$

"3/

2012

201.

201

201"

201(

2!5+3!

252+26

272+45

2/4+24

"$7+73

$$$2+!7

$"6"+$5

$472+2!

$53/+/7

$7$7+$7

5!!+$2

"/6+!$

426+72

46!+36

4/7+72

43"+72

5/2+/5

64!+"3

6/$+6$

746+/"

$""4+23

$4$3+47

$5"!+//

$65"+46

$735+74

2'61

361/

1126"2

1226'

1.2623

2012

201.

201

201"

201(

5/6+4

766+"3

3"5+!3

/!$+36

/74+!76

$52

$52

$52

$64

$73

;427+4$

;34+$/

;$$2+52

;$22+47

;$"2+23

($52)

($52)

(""4)

("6$)

("3/)

$63+7/

63$+//

54!+76

532+3/

6"!+5!

2012

201.

201

201"

201(

$63+7/

63$+//

54!+76

532+3/

6"!+5

$63+7/

63$+//

54!+76

532+3/

6"!+5

201'

2013

201/

2020

11!0

12!.""

1.!.

1!11

3+!

3+!

3+!

3+!

6"5

643

66!

674

6!!!

65$/

7!7/

7635

$/2

2!7

224

242

(!32'

'!.'.

'!/(.

3!(00

2!3(0

.!03/

.!..(

.!(0.

/!(3'

10!(2

11!2//

12!20.

1!'".

1!3/.

2!0"

2!20/

"+!

"+!

"+!

"+!

5/+2x

5/+2x

5/+2x

5/+2x

$2+7x

$2+7x

$2+7x

$2+7x

"$+!x

"$+!x

"$+!x

"$+!x

42$

454

4/$

5"!

201'

2013

201/

2020

"4"+2!

"7!+66

4!!+"$

4"2+"4

$354+55

2!!2+/!

2$6"+$4

2""6+$/

5"7+54

53!+56

626+//

677+$6

3!6+6/

37$+24

/4!+/"

$!$6+2$

$/23+6!

2!32+37

224/+52

242/+43

1263"

1"623

1((6(

1'/6/(

201'

2013

201/

2020

$!5$+/62

$$"5+/3

$227

$"25+$

$/2

2!7

224

242

;$42+35

;$54+23

;$66+64

;$7/+/6

(42$)

(454)

(4/$)

(5"!)

63!+6$

7"4+6!

7/"+36

357+44

201'

2013

201/

2020

63!+6$

7"4+6

7/"+36

357+44

63!+6$

7"4+6

7/"+36

357+44

New Heritage Doll Company: Capital Budgeting Exhibit 2 )ele$ted -perating #ro9e$tion% or  Design Your Own Doll  2010

2011

Revenue

0

Revenue Growth #rodu$tion Co%t%

Fixed Production Expense (excl depreciation)

!

0n;?ouse 01 Costs (pp #evelop&ent)

4"5

Variable Production Costs

!

#epreciation

! 4"5

&otal #rodu$tion Co%t% )elling! *eneral + ,dmini%trative

$2!$

!

&otal -perating Expen%e%

$2!$

4"5

($2!$)

(4"5)

-perating #roit

Working Capital Assumptions: %ini&u& Cash 'alance as  o *ales #a,s *ales -utstandin. 0nventor, 1urnover (p rod+ costendin. inv+) #a,s Pa,able -utstandin. (based on tot+ op+ exp+) Capital Expenditures 4or5ing Capital

46$!

!

2010

2011

Cash

!

ccounts Receivable 0nventor, ccounts Pa,able 1otal et 8or9in. Capital

$!!!

#elta o et 8or9in. Capital

 

1!000600

-perating Ca%hlow

 et -peratin. Proit ater 1axes (E'01 :($; 4! 1ax Rate))

;72!+6!

;26$+!!

#epreciation (shown above)

!

!

%inus chan.e o etwor9in. Capital

!

($!!!+!!)

%inus Capital Expenditures

(46$!)

1otal =earl, Cash Flow

;5""!+6!

! ;$26$+!!

N#7 +
Final Cashlows #iscount Rate or %ediu& Ris9 Pro>ect Net #re%ent 7alue o the 88DC #ro9e$t
;5""!+6! /+!! >.!1106/0 >1=

2011

;$26$+!!

2012

201.

201

201"

201(

201'

2013

201/

(!000

1!.(0

20!222

21!."

22!'21

2!03

2"!"2/

2'!0(1

$"/+"

4!+3

6+!

6+!

6+!

6+!

6+!

$65!

$63"

$7$7

$75$

$736

$322

$353

$3/5

!

!

!

!

!

!

!

!

225!

765$

$$427

$2$32

$2/3"

$"3""

$47"6

$56/4

"$!

"$!

"$!

4"6

462

4/!

52!

55$

42$!

/644

$"454

$4"6/

$52"$

$6$45

$7$$"

$3$4!

$24!

2/22

4!44

4237

4544

43$7

5$!6

54$2

545!

$2566

$74/3

$3656

$/775

2!/62

222$/

2"55"

55!

$7/4

2724

277/

2/46

"$2"

""$!

"5!/

"+!

"+!

"+!

"+!

"+!

"+!

"+!

"+!

5/+2x

5/+2x

5/+2x

5/+2x

5/+2x

5/+2x

5/+2x

5/+2x

$2+2x

$2+"x

$2+6x

$2+7x

$2+7x

$2+7x

$2+7x

$2+7x

""+7x

""+3x

""+/x

""+/x

""+/x

""+/x

""+/x

""+/x

"$!

"$!

2$/2

326

375

/23

/3"

$!4"

2012

201.

201

201"

201(

201'

2013

201/

$3!

4"$

6!7

64"

632

72"

766

3$2

/7"

2"23

"273

"475

"63"

"/!4

4$"/

4"37

"46

736

$!65

$$"!

$$/7

$26/

$"45

$426

474

$$"5

$5/3

$6/4

$7/6

$/!4

2!$3

2$"/

$!24

24$!

""52

"55"

"766

"//2

42"2

4436

261.

1!.3"6"3

/16//

2016"3

21.621

22"6//

2./6""

2".6/2

$6"4+22

$667+52

$767+43

$37"+56

$/36+!6

2$!5+$4

""!+$3 "$!

$!76+53 "$!

"$!

4"6

462

4/!

52!

55$

(24+$")

($"35+53)

(/4$+//)

(2!$+53)

(2$"+2$)

(225+//)

(2"/+55)

(25"+/2)

("$!)

("$!)

(2$/2)

(326)

(375)

(/23)

(/3")

($!4")

"!6+!5

;"!/+!!

;$$3/+57

$!76+44

$$4$+"7

$2!/+37

$232+6$

$"5/+42

2012

201.

201(

201'

2013

201/

"!6+!5

;"!/+!!

$$4$+"7

$2!/+37

$232+6$

$"5/+42

201

;$$3/+57

201"

$!76+44

2020 23!(3"

6+! $/"" ! $67$2 534 $/22/ 57"7 24/66 "7$/

"+! 5/+2x $2+7x ""+/x $$!5 2020

36$ 465! $5$2 2267 4755 2(/61'

22"$+4! 534 (26/+$7) ($$!5) $44$+!"

2020

$44$+!"