New Heritage Doll Company: Capital Budgeting

Teaching Note
TN Exhibit 1
NPV Analysis for Match My Doll Clothing Line Extension
2010
Ingresos
Crecimiento de ingresos

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

4,500

6,860

8,409

9,082

9,808

10,593

11,440

12,355

13,344

14,411

NA

52.4%

22.6%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

8.0%

Costos de produccin
Gastos fijos de produccin (exc. Depreciac)

575

575

587

598

610

622

635

648

660

674

2,035

3,404

4,291

4,669

5,078

5,521

6,000

6,519

7,079

7,685

0.4522

0.4962

0.5103

0.5141

0.5178

0.5212

0.5245

0.5276

0.5305

0.5332

152

152

152

152

164

178

192

207

224

242

2,762

4,131

5,029

5,419

5,853

6,321

6,827

7,373

7,963

8,600

Gastos de Administracion y Ventas

1,250

1,155

1,735

2,102

2,270

2,452

2,648

2,860

3,089

3,336

3,603

Gastos totales de Explotacin

1,250

3,917

5,866

7,132

7,690

8,305

8,969

9,687

10,462

11,299

12,203

Costos variable de produccin

Depreciacin
Costos Totale de produccin

Beneficio Operativo

583

994

1,277

1,392

1,503

1,623

1,753

1,893

2,045

2,209

Operating Profit/Sales

(1,250)

0.130

0.145

0.152

0.153

0.153

0.153

0.153

0.153

0.153

0.153

SG&A/Sales

0.257

0.253

0.250

0.250

0.250

0.250

0.250

0.250

0.250

0.250

Asunciones de Capital de trabajo

Saldo de caja minimo como % de las ventas

NA

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

Das de venta por cobrar

NA

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

Rotacion de inventario

NA

7.7x

8.3x

12.7x

12.7x

12.7x

12.7x

12.7x

12.7x

12.7x

12.7x

Plazo medio de pago

0.0x

30.8x

30.9x

31.0x

31.0x

31.0x

31.0x

31.0x

31.0x

31.0x

31.0x

952

152

152

334

361

389

421

454

491

530

Capital Expenditures

1,470

Growth in capex

Capital de Trabajo
Saldo Mnimo Efectivo
Cuentas Por Cobrar
inventario
Cuentas por Pagar
Capital de trabajo total
Aumento Capital de trabajo
NWC/Sales

2010

800
800

-35.2%
-84.0%
0.0%
119.3%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
0.2116 0.02218659 0.01810009 0.03675604 0.03675571 0.03675186 0.03675677 0.03675376 0.03675892 0.03675613
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
135
206
252
272
294
318
343
371
400
432
729
1112
1363
1472
1590
1717
1855
2003
2163
2336
360
500
396
427
461
498
538
581
627
677
317
484
593
640
692
747
807
871
941
1016
907
1334
1418
1531
1653
1786
1929
2083
2250
2429
107
427
84
113
122
132
143
154
167
180
0.202
0.195
0.169
0.169
0.169
0.169
0.169
0.169
0.169
0.169

NPV Analysis
Free Cash Flows
EBIT(1-t)
plus depreciation
less NWC
less capital expenditures
Free Cash Flow
Terminal value

2010
(750)
0
(800)
(1,470)
(3,020)

2012
596
152
(427)
(152)
169

2013
766
152
(84)
(152)
682

2014
835
152
(113)
(334)
541

2015
902
164
(122)
(361)
583

2016
974
178
(132)
(389)
630

2017
1,052
192
(143)
(421)
680

2018
1,136
207
(154)
(454)
735

2019
1,227
224
(167)
(491)
793

3.00%

2020
1,325
242
(180)
(530)
857
16,345

Initial Outlays
Net working capital
Net property, plant & equipment
Discount factor
Present value
Net Present Value
NPV without Terminal Value

2011
350
152
(107)
(952)
(557)

(800)
(1470)

8.40%
$
$

1.0000
(3,020)
7,150
(146)

0.9225
(514)

0.8510
144

0.7851
536

0.7242
392

0.6681
390

0.6163
388

0.5686
387

0.5245
385

0.4839
384

0.4464
7679

2010
(3,020)
7.6%

2011
(557)

2012
169

2013
682

2014
541

2015
583

2016
630

2017
680

2018
735

2019
793

2020
17,202

2010
(3,020)
(3,020)

2011
(557)
(3,577)

2012
169
(3,408)

2013
682
(2,726)

2014
541
(2,185)

2015
583
(1,602)

2016
630
(972)

2017
680
(291)

2018
2019
735
793
443
7.40 years

2020
17,202

IRR Analysis
Cash Flows
IRR

Payback Analysis
Cash flows
Cumulative cash flow
Payback period
5-year Cumulative EBITDA

Profitability Index
NPV/Initial Investment

1.35

6,522

New Heritage Doll Company: Capital Budgeting

Teaching Note
TN Exhibit 2
NPV Analyss for Design Your Own Doll
2010

ingresos
Crecimiento De Ingresos
Production Costs
Costos De Produccin
Fixed Production Expense (excl depreciatio Gastos fijos de produccin ( deprecia
Additional development costs (IT personnel Los costes de desarrollo a
Variable Production Costs
Costos variables de produccin
Depreciation
depreciacin
Total Production Costs
0
Total de Costos de Produc
Selling, General & Administrative
1,201
De venta, generales y adm
Total Operating Expenses
1,201
Total gastos operativos
Revenue

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

6,000

14,360

20,222

21,435

22,721

24,084

25,529

27,061

28,685

NA

139.3%

40.8%

6.0%

6.0%

6.0%

6.0%

6.0%

6.0%

1,650

1,683

1,717

1,751

1,786

1,822

1,858

1,895

1,933

2,250

7,651

11,427

12,182

12,983

13,833

14,736

15,694

16,712

RevenueRevenue Growth

Operating Profit
OperatinOperating Profit/Sales
SG&A/SSG&A/Sales

Beneficio Operativo
Beneficio Operativo / Ventas
GAV / Ventas

Trabajar Supuestos capitales :

Saldo de efectivo mnim
Das de ventas pendiente
Inventory Turnover (prod. cost/ending inv.) Inventario Facturacin (pro
Days Payable Outstanding (based on tot. opDas pendientes de pago (e

(1,201)

0
435
0
0

310

310

310

436

462

490

520

551

584

435

4,210

9,644

13,454

14,369

15,231

16,145

17,113

18,140

19,229

1,240

2,922

4,044

4,287

4,544

4,817

5,106

5,412

5,737

435

5,450

12,566

17,498

18,656

19,775

20,962

22,219

23,553

24,966

(435)

550

1,794

2,724

2,779

2,946

3,123

3,310

3,508

3,719

0.092

0.125

0.135

0.130

0.130

0.130

0.130

0.130

0.130

0.207

0.203

0.200

0.200

0.200

0.200

0.200

0.200

0.200

Working Capital Assumptions:

Minimum Cash Balance as % of Sales

NA

NA

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

Days Sales Outstanding

NA

NA

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

NA

NA

12.2x

12.3x

12.6x

12.7x

12.7x

12.7x

12.7x

12.7x

12.7x

NA

NA

33.7x

33.8x

33.9x

33.9x

33.9x

33.9x

33.9x

33.9x

33.9x

4,610

310

310

2,192

826

875

928

983

1,043

1,105

0%

608%

-62%

6%

6%

6%

6%

6%

0.052

0.022

0.108

0.039

0.039

0.039

0.039

0.039

0.039

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Capital Expenditures
Growth in capex
Net Working Capital Accounts

2010

Cash

180

431

607

643

682

723

766

812

861

Accounts Receivable

973

2328

3278

3475

3683

3904

4139

4387

4650

Inventory

346

786

1065

1130

1197

1269

1345

1426

1512

Accounts Payable
Net Working Capital

1,000

NWC

1,000
NWC/Sales

474

1135

1598

1694

1796

1904

2018

2139

2267

1,024

2,410

3,352

3,553

3,766

3,992

4,232

4,486

4,755

24

1,386

942

202

213

226

240

254

269

0.171

0.168

0.166

0.166

0.166

0.166

0.166

0.166

0.166

NPV Analysis
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(721)

(261)

330

1,077

1,634

1,667

1,767

1,874

1,986

2,105

2,231

Free Cash Flows

EBIT(1-t)
plus depreciation

310

310

310

436

462

490

520

551

584

(1,000)

(24)

(1,386)

(942)

(202)

(213)

(226)

(240)

(254)

(269)

(4,610)

(310)

(310)

(2,192)

(826)

(875)

(928)

(983)

(1,043)

(5,331)

(1,261)

306

(309)

(1,190)

1,076

1,141

1,210

1,283

1,359

less NWC
less capital expenditures
Free Cash Flow
Terminal value

3.00%

Discount factor

9.00%

(1,105)
1,441
24,737

Present value

1.000

0.9174

0.8417

0.7722

0.7084

0.6499

0.5963

0.5470

0.5019

0.4604

0.4224

(5,331)

(1,157)

258

(239)

(843)

700

681

662

644

626

11,058

2010
(5,331)
-0.5%

2011
(1,261)

2012
306

2013
(309)

2014
(1,190)

2015
1,076

2016
1,141

2017
1,210

2018
1,283

2019
1,359

2020
26,178

2010
(5,331)
(5,331)

2011
(1,261)
(6,592)

2012
306
(6,286)

2013
(309)
(6,595)

2014
(1,190)
(7,784)

2015
1,076
(6,708)

2016
1,141
(5,566)

2017
1,210
(4,357)

2018
1,283
(3,074)

2019
1,359
(1,715)

2020
26,178
24,464
>10 years

Net Present Value

7,058

NPV without Terminal Value

(3,391)

IRR Analysis
Cash Flows
IRR

Payback Analysis
Cash flows
Cumulative cash flow
Payback period
5-year Cumulative EBITDA

Profitability Index
NPV/Initial Investment

1.32

8,778

ingresos
Crecimiento De Ingresos
Costos De Produccin
Gastos fijos de produccin ( depreciacin excl )
Los costes de desarrollo adicionales (personal de TI )
Costos variables de produccin
depreciacin
Total de Costos de Produccin
De venta, generales y administrativos
Total gastos operativos
Beneficio Operativo
Beneficio Operativo / Ventas
GAV / Ventas
Trabajar Supuestos capitales :
Saldo de efectivo mnimo como% de Ventas
Das de ventas pendientes
Inventario Facturacin (prod . De costo / inv final. )
Das pendientes de pago (en base a tot . Op. Exp . )

New Heritage Doll Company: Capital Budgeting

Teaching Note
TN Exhibit 3
NPV Sensitivity Analyses
NPV of Match My Doll Clothing Line Extension

Discount rate
7.70%
8.40%
9.00%

$
$
$

0%
5,289 $
4,408 $
3,766 $

TV growth rate
1%
6,141 $
5,075 $
4,314 $

0%
5,830 $
4,404 $
3,372 $

TV growth rate
1%
7,263 $
5,526 $
4,294 $

2%
7,292 $
5,950 $
5,019 $

3%
8,932
7,150
5,958

NPV if
TV=BV of
NWC + PPE
$
3,011
$
2,687
$
2,425

3%
11,957
9,016
7,058

NPV if
TV=BV of
NWC + PPE
$
3,567
$
2,980
$
2,507

NPV of Design Your Own Doll

Discount rate
7.70%
8.40%
9.00%

$
$
$

2%
9,198 $
6,998 $
5,479 $