New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing Line Expansion
2010
Revenue
Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses
Operating Profit

2011
4,500

2012
6,860
52.4%

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

575
3,404
152
4,131
1,735
5,866

(1,250)

583

994

3.0%
59.2x
7.7x
30.8x

3.0%
59.2x
8.3x
30.9x

952

152

Working Capital Assumptions:

Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

1,470

Balance Sheet
Networking Capital
2010
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures
Networking capital to support sales
Change in Networking capital

2010
(1,250)
(1,250)

2011
2012
135
206
729
1,112
359.6615 500.1211
330.118 496.6011
894
1,321

2011
583
-233.12
350
152

(1,250)

502

1,470
800
(94)

952
894
(427)

2012
994
-397.6
596
152
749
152
1,321
(84)

Total cash flow

Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

(2,814)

(878)

512

(2,814)
55,034

(878)

512

9%
22,192.24
37%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,277

1,392

1,503

1,623

1,753

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

334

361

389

421

454

491

530

2013
2014
2015
2016
2017
2018
2019
2020
252
272
294
318
343
371
400
432
1,363
1,472
1,590
1,717
1,855
2,003
2,163
2,336
396.0079 426.7244 460.8583 497.7244 537.5433 580.5591 626.9921 677.1575
605.8844 653.3085 705.5752 762.0134 822.9799 888.8316 959.9252 1036.728
1,406
1,518
1,639
1,771
1,912
2,065
2,231
2,409

2013
1,277
-510.92
766
152
919
152
1,406
(113)

2014
1,392
-556.72
835
152
987
334
1,518
(121)

2015
2016
2017
1,503
1,623
1,753
-601.24 -649.384 -701.308
902
974
1,052
164
178
192

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,066

1,152

1,244

1,343

1,451

1,567

361
1,639
(131)

389
1,771
(142)

421
1,912
(153)

454
2,065
(165)

491
2,231
(178)

530
2,409
2,409

654

532

575

621

670

724

654

532

575

621

670

724

782

3,446
50211.09
782
53,657

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing Line Expansion
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

575
2,035
152
2,762
1,155
3,917

0
1,250
1,250

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing Line Expansion
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729

Balance Sheet
Networking Capital
Cash
Accounts receivable

359.66146
330.11801
894

Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures
Networking capital to support sales
Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

2010
(1,250)
(1,250)

2011
583
-233.12
350
152

(1,250)

502

1,470
800
(94)

952
894
(427)

(2,814)

(878)

(2,814)
48,327

(878)

9%
19,359.08
35%

hing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
206
1,112

2013
252
1,363

2014
272
1,472

2015
294
1,590

2016
318
1,717

2017
343
1,855

hing Line Expansion

500.12107 396.00787 426.72441 460.85827 497.72441 537.54331

496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152
749
152
1,321
(84)

2013
1,277
-510.92
766
152
919
152
1,406
(113)

2014
1,392
-556.72
835
152
987
334
1,518
(121)

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

1,066

1,152

1,244

361
1,639
(131)

389
1,771
(142)

421
1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
371
2,003

2019
400
2,163

2020
432
2,336

580.55906 626.99213 677.15748

888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454
2,065
(165)

491
2,231
(178)

530
2,409
2,409

724

782

724

782

3,446
43503.972
46,950

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing

Revenue

2010

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729
359.66146
330.11801
894

2010
(1,250)

2011
583
-233.12
350
152

Balance Sheet
Networking Capital
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures

(1,250)

(1,250)

502

1,470

952

Networking capital to support sales

Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

800
(94)

894
(427)

(2,814)

(878)

(2,814)
45,565

(878)

9%
18,192.49
34%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
2013
2014
2015
2016
2017
206
252
272
294
318
343
1,112
1,363
1,472
1,590
1,717
1,855
500.12107 396.00787 426.72441 460.85827 497.72441 537.54331
496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152

2013
1,277
-510.92
766
152

2014
1,392
-556.72
835
152

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

749

919

987

1,066

1,152

1,244

152

152

334

361

389

421

1,321
(84)

1,406
(113)

1,518
(121)

1,639
(131)

1,771
(142)

1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
2019
2020
371
400
432
2,003
2,163
2,336
580.55906 626.99213 677.15748
888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454

491

530

2,065
(165)

2,231
(178)

724

782

724

782

2,409
2,409
3,446
40742.217
44,188

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing

Revenue

2010

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729
359.66146
330.11801
894

2010
(1,250)

2011
583
-233.12
350
152

Balance Sheet
Networking Capital
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures

(1,250)

(1,250)

502

1,470

952

Networking capital to support sales

Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

800
(94)

894
(427)

(2,814)

(878)

(2,814)
59,741

(878)

8.4%
25,669.00
38%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
2013
2014
2015
2016
2017
206
252
272
294
318
343
1,112
1,363
1,472
1,590
1,717
1,855
500.12107 396.00787 426.72441 460.85827 497.72441 537.54331
496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152

2013
1,277
-510.92
766
152

2014
1,392
-556.72
835
152

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

749

919

987

1,066

1,152

1,244

152

152

334

361

389

421

1,321
(84)

1,406
(113)

1,518
(121)

1,639
(131)

1,771
(142)

1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
2019
2020
371
400
432
2,003
2,163
2,336
580.55906 626.99213 677.15748
888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454

491

530

2,065
(165)

2,231
(178)

724

782

724

782

2,409
2,409
3,446
54918.381
58,364

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

575
2,035
152
2,762
1,155
3,917

0
1,250
1,250

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729

Balance Sheet
Networking Capital
Cash
Accounts receivable

359.66146
330.11801
894

Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures
Networking capital to support sales
Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

2010
(1,250)
(1,250)

2011
583
-233.12
350
152

(1,250)

502

1,470
800
(94)

952
894
(427)

(2,814)

(878)

(2,814)
51,854

(878)

8.4%
22,148.36
36%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
206
1,112

2013
252
1,363

2014
272
1,472

2015
294
1,590

2016
318
1,717

2017
343
1,855

Doll Clothing Line Expansion

500.12107 396.00787 426.72441 460.85827 497.72441 537.54331

496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152
749
152
1,321
(84)

2013
1,277
-510.92
766
152
919
152
1,406
(113)

2014
1,392
-556.72
835
152
987
334
1,518
(121)

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

1,066

1,152

1,244

361
1,639
(131)

389
1,771
(142)

421
1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
371
2,003

2019
400
2,163

2020
432
2,336

580.55906 626.99213 677.15748

888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454
2,065
(165)

491
2,231
(178)

530
2,409
2,409

724

782

724

782

3,446
47031.321
50,477

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing

Revenue

2010

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729
359.66146
330.11801
894

2010
(1,250)

2011
583
-233.12
350
152

Balance Sheet
Networking Capital
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures

(1,250)

(1,250)

502

1,470

952

Networking capital to support sales

Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

800
(94)

894
(427)

(2,814)

(878)

(2,814)
48,660

(878)

8.4%
20,722.27
35%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
2013
2014
2015
2016
2017
206
252
272
294
318
343
1,112
1,363
1,472
1,590
1,717
1,855
500.12107 396.00787 426.72441 460.85827 497.72441 537.54331
496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152

2013
1,277
-510.92
766
152

2014
1,392
-556.72
835
152

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

749

919

987

1,066

1,152

1,244

152

152

334

361

389

421

1,321
(84)

1,406
(113)

1,518
(121)

1,639
(131)

1,771
(142)

1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
2019
2020
371
400
432
2,003
2,163
2,336
580.55906 626.99213 677.15748
888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454

491

530

2,065
(165)

2,231
(178)

724

782

724

782

2,409
2,409
3,446
43836.563
47,282

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing

Revenue

2010

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729
359.66146
330.11801
894

2010
(1,250)

2011
583
-233.12
350
152

Balance Sheet
Networking Capital
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures

(1,250)

(1,250)

502

1,470

952

Networking capital to support sales

Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

800
(94)

894
(427)

(2,814)

(878)

(2,814)
66,486

(878)

7.7%
30,733.76
39%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
2013
2014
2015
2016
2017
206
252
272
294
318
343
1,112
1,363
1,472
1,590
1,717
1,855
500.12107 396.00787 426.72441 460.85827 497.72441 537.54331
496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152

2013
1,277
-510.92
766
152

2014
1,392
-556.72
835
152

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

749

919

987

1,066

1,152

1,244

152

152

334

361

389

421

1,321
(84)

1,406
(113)

1,518
(121)

1,639
(131)

1,771
(142)

1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
2019
2020
371
400
432
2,003
2,163
2,336
580.55906 626.99213 677.15748
888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454

491

530

2,065
(165)

2,231
(178)

724

782

724

782

2,409
2,409
3,446
61662.743
65,109

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

575
2,035
152
2,762
1,155
3,917

0
1,250
1,250

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing
2010
Revenue

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729

Balance Sheet
Networking Capital
Cash
Accounts receivable

359.66146
330.11801
894

Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures
Networking capital to support sales
Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

2010
(1,250)
(1,250)

2011
583
-233.12
350
152

(1,250)

502

1,470
800
(94)

952
894
(427)

(2,814)

(878)

(2,814)
56,768

(878)

7.7%
26,105.62
37%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
206
1,112

2013
252
1,363

2014
272
1,472

2015
294
1,590

2016
318
1,717

2017
343
1,855

Doll Clothing Line Expansion

500.12107 396.00787 426.72441 460.85827 497.72441 537.54331

496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152
749
152
1,321
(84)

2013
1,277
-510.92
766
152
919
152
1,406
(113)

2014
1,392
-556.72
835
152
987
334
1,518
(121)

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

1,066

1,152

1,244

361
1,639
(131)

389
1,771
(142)

421
1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
371
2,003

2019
400
2,163

2020
432
2,336

580.55906 626.99213 677.15748

888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454
2,065
(165)

491
2,231
(178)

530
2,409
2,409

724

782

724

782

3,446
51945.041
55,391

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing

Revenue

2010

2011
4,500

Revenue Growth
Production Costs
Fixed Production Expense (excl depreciation)
Variable Production Costs
Depreciation
Total Production Costs
Selling, General & Administrative
Total Operating Expenses

0
1,250
1,250

575
2,035
152
2,762
1,155
3,917

(1,250)

583

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales
Days Sales Outstanding
Inventory Turnover (prod. cost/ending inv.)
Days Payable Outstanding (based on tot. op. exp.)
Capital Expenditures

3.0%
59.2x
7.7x
30.8x
1,470

952

2010

2011
135
729
359.66146
330.11801
894

2010
(1,250)

2011
583
-233.12
350
152

Balance Sheet
Networking Capital
Cash
Accounts receivable
Inventories
Accounts Payable
Networking capital

Earnings before income taxes

Income Taxes
Net operating profit after tax (NOPAT)
Add back depreciation of equipment
Cash flow from operations
Capital expenditures

(1,250)

(1,250)

502

1,470

952

Networking capital to support sales

Change in Networking capital
Total cash flow
Terminal Value
Cash flow after terminal value
Free cash flow
Discount rate
Net Present value @cost of capital
Internal Rate of return

800
(94)

894
(427)

(2,814)

(878)

(2,814)
52,922

(878)

7.7%
24,273.65
36%

Doll Clothing Line Expansion

2012
6,860
52.4%

2013
8,409
22.6%

2014
9,082
8.0%

2015
9,808
8.0%

2016
10,593
8.0%

2017
11,440
8.0%

575
3,404
152
4,131
1,735
5,866

587
4,291
152
5,029
2,102
7,132

598
4,669
152
5,419
2,270
7,690

610
5,078
164
5,853
2,452
8,305

622
5,521
178
6,321
2,648
8,969

635
6,000
192
6,827
2,860
9,687

994

1,277

1,392

1,503

1,623

1,753

3.0%
59.2x
8.3x
30.9x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

152

152

334

361

389

421

2012
2013
2014
2015
2016
2017
206
252
272
294
318
343
1,112
1,363
1,472
1,590
1,717
1,855
500.12107 396.00787 426.72441 460.85827 497.72441 537.54331
496.6011 605.88442 653.30848 705.5752 762.0134 822.97991
1,321
1,406
1,518
1,639
1,771
1,912

2012
994
-397.6
596
152

2013
1,277
-510.92
766
152

2014
1,392
-556.72
835
152

2015
1,503
-601.24
902
164

2016
1,623
-649.384
974
178

2017
1,753
-701.308
1,052
192

749

919

987

1,066

1,152

1,244

152

152

334

361

389

421

1,321
(84)

1,406
(113)

1,518
(121)

1,639
(131)

1,771
(142)

1,912
(153)

512

654

532

575

621

670

512

654

532

575

621

670

2018
12,355
8.0%

2019
13,344
8.0%

2020
14,411
8.0%

648
6,519
207
7,373
3,089
10,462

660
7,079
224
7,963
3,336
11,299

674
7,685
242
8,600
3,603
12,203

1,893

2,045

2,209

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

3.0%
59.2x
12.7x
31.0x

454

491

530

2018
2019
2020
371
400
432
2,003
2,163
2,336
580.55906 626.99213 677.15748
888.83156 959.92517 1036.728
2,065
2,231
2,409

2018
1,893
-757.32
1,136
207

2019
2,045
-818
1,227
224

2020
2,209
-883.4
1,325
242

1,343

1,451

1,567

454

491

530

2,065
(165)

2,231
(178)

724

782

724

782

2,409
2,409
3,446
48098.451
51,544

New Heritage Doll Company: Capital Budgeting

Exhibit 1
Selected Operating Projections for Match My Doll Clothing Line Expansion
WACC
9%
9%
9%
8.4%
8.4%
8.4%
7.7%
7.7%
7.7%

Terminal ValueNet Present Value

22,192.24
2%
1%
19,359.08
0.5%
18,192.49
2%
25,669.00
1%
22,148.36
0.5%
20,722.27
2%
30,733.76
1%
26,105.62
0.5%
24,273.65

IRR
37%
35%
34%
38%
36%
35%
39%
37%
36%

othing Line Expansion

New Heritage Doll Company: Capital Budgeting

Exhibit 2
Selected Operating Projections for Design Your Own Doll
2010
Revenue

2011

2012

2013

6,000

14,360

Revenue Growth

139.3%

Production Costs
Fixed Production Expense (excl depreciation)

1,650

1,683

Variable Production Costs

2,250

7,651

Depreciation

310

310

Total Production Costs

4,210

9,644

Selling, General & Administrative

1,201

1,240

2,922

Total Operating Expenses

1,201

5,450

12,566

(1,201)

550

1,794

Operating Profit
Working Capital Assumptions:
Minimum Cash Balance as % of Sales

3.0%

3.0%

Days Sales Outstanding

59.2x

59.2x

Inventory Turnover (prod. cost/ending inv.)

12.2x

12.3x

Days Payable Outstanding (based on tot. op. exp.)

33.7x

33.8x

310

310

Capital Expenditures

4,610

2014

2015

2016

2017

2018

2019

2020

20,222

21,435

22,721

24,084

25,529

27,061

28,685

40.8%

6.0%

6.0%

6.0%

6.0%

6.0%

6.0%

1,717

1,751

1,786

1,822

1,858

1,895

1,933

11,427

12,182

12,983

13,833

14,736

15,694

16,712

310

436

462

490

520

551

584

13,454

14,369

15,231

16,145

17,113

18,140

19,229

4,044

4,287

4,544

4,817

5,106

5,412

5,737

17,498

18,656

19,775

20,962

22,219

23,553

24,966

2,724

2,779

2,946

3,123

3,310

3,509

3,719

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

3.0%

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

59.2x

12.6x

12.7x

12.7x

12.7x

12.7x

12.7x

12.7x

33.9x

33.9x

33.9x

33.9x

33.9x

33.9x

33.9x

2,192

826

875

928

983

1,043

1,105