Overview: In this first milestone assignment, you will begin to analyze the New Heritage Doll Comрany case study, taking on the role of Emily Harris, the company’s financial analyst. Emily is tasked with evaluating the merit of two capital projects, performing key calculations, and taking into considerations the questions about the two projects that senior management is likely to ask. She must choose the best project and defend her selection by explaining how the project aligns with the company’s overall mission. To do so, she must explain how she arrived at her decision, justifying her methodology, outlining the strengths and weaknesses of the selected project, and offering a plan to mitigate any associated risk.
This final project mimics the type of real-life situations that financial analysts encounter on the job. In the corporate world, companies routinely engage in capital project analyses to determine a venture’s profitability and viability. Even when a project has interest and support, it is always necessary to perform detailed analyses to gauge all possible factors that might impact the success of the project. In this first milestone assessment, you will begin your analysis of the two proposed capital projects by evaluating the New Heritage Doll Company’s background and performing initial calculations to determine the projects’ merits.
Prompt: To complete the first step of this final project, you will submit a statement that identifies the New Heritage Doll Company’s mission, vision, and values as presented in the case study. How might these two projects align with the company’s stated goals? In your statement, summarize the two capital investment options and consider the legal, ethical, and/or professional standards that may be relevant. To begin, you need to do the following:
• Carefully read the New Heritage Doll Company: Capital Budgeting case study.
• Identify the New Heritage Doll Company’s mission, vision, and values.
• Describe the main goal of the company’s capital investment, and summarize each proposed project:
o Expansion of the successful “Match My Doll Clothing” line
o Initiating a new “Design Your Own Doll” line
• Discuss whether the projects are compatible with goals of the company.
• Evaluate any apparent legal, ethical, and/or professional standards that may impact the success of these two projects.
NOTE: I did the calculations for this potion below. Refer to the Project_Calculations.xlsx uploaded document! Textbook PDF will be uploaded as well.
Next, you must conduct some initial calculations, including NWC (net working capital), NPV (net present value), IRR (internal rate of return), and EBIT (earnings before interest and taxes), taking care to be accurate with your numbers. To do this, locate the necessary numbers from the case study and plug them into the Excel template to perform these method calculations. Document your results in the “Milestone One” section of each specific project tab. This section should include your NPV, IRR, and EBIT calculations for the specific project. The module resources may also be useful.
1. Be sure to explain the three methods and defend why they should be used in the evaluation of capital projects such as those considered by the New Heritage Doll Company.
2. Why are these financial tools used? Support your statements using at least two scholarly articles.
Note that the course textbook will also be useful as you progress through this project. As finance students and professionals, you are also encouraged to use your own experience, understanding, and knowledge of business and industry structure to drive your analysis.
Specifically, the following critical elements must be addressed:
A. Describe the organization, including its mission, vision, and values. Specifically, you should clearly identify any strategic objectives of your firm, as those will be important to reference in your recommendations.
B. Additionally, summarize the two capital investment options. Specifically, explain all legal, ethical, or professional standards that apply to both, using specific examples to illustrate.
IV. Analysis of the Capital Investment Options
A. Analyze each of the projects with regard to their alignment to the mission, vision, and values of the company. Which of the two options has the strongest alignment and why?
B. Analyze each of the projects for their financial implications. Include your calculations and results for each of the following evaluation methods:
ii. NPV, IRR, and EBIT
iii. Be sure that all of your calculations are complete, accurate, and precise.
This company background and initial calculations assignment will be incorporated into the final capital budgeting case report. This milestone is due in Module Three.