Exhibit 1 MMDCNew Heritage Doll Company: Capital
BudgetingExhibit 1Selected Operating Projections for Match My Doll
Clothing Line Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value50211.0907734348Cash flow after terminal
value(2,814)(878)51265453257562167072478253,657Free cash flow
55,034
Discount rate9%
Net Present value @cost of capital22,192.24Internal Rate of
return 37%
9% and 1%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
New Heritage Doll Company: Capital BudgetingExhibit 1Selected
Operating Projections for Match My Doll Clothing Line Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value43503.9720304147Cash flow after terminal
value(2,814)(878)51265453257562167072478246,950Free cash flow
48,327
Discount rate9%
Net Present value @cost of capital19,359.08Internal Rate of
return 35%
9% and 0.5%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value40742.217253877Cash flow after terminal
value(2,814)(878)51265453257562167072478244,188Free cash flow
45,565
Discount rate9%
Net Present value @cost of capital18,192.49Internal Rate of
return 34%
8.4% and 2%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value54918.3805334443Cash flow after terminal
value(2,814)(878)51265453257562167072478258,364Free cash flow
59,741
Discount rate8.4%
Net Present value @cost of capital25,669.00Internal Rate of
return 38%
8.4% and 1%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
New Heritage Doll Company: Capital BudgetingExhibit 1Selected
Operating Projections for Match My Doll Clothing Line Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value47031.3211139619Cash flow after terminal
value(2,814)(878)51265453257562167072478250,477Free cash flow
51,854
Discount rate8.4%
Net Present value @cost of capital22,148.36Internal Rate of
return 36%
8.4% and 0.5%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value43836.5628680955Cash flow after terminal
value(2,814)(878)51265453257562167072478247,282Free cash flow
48,660
Discount rate8.4%
Net Present value @cost of capital20,722.27Internal Rate of
return 35%
7.7% and 2%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value61662.7430550954Cash flow after terminal
value(2,814)(878)51265453257562167072478265,109Free cash flow
66,486
Discount rate7.7%
Net Present value @cost of capital30,733.76Internal Rate of
return 39%
7.7% and 1%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
New Heritage Doll Company: Capital BudgetingExhibit 1Selected
Operating Projections for Match My Doll Clothing Line Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value51945.0412303459Cash flow after terminal
value(2,814)(878)51265453257562167072478255,391Free cash flow
56,768
Discount rate7.7%
Net Present value @cost of capital26,105.62Internal Rate of
return 37%
7.7% and 0.5%New Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
Expansion
20102011201220132014201520162017201820192020Revenue4,5006,8608,4099,0829,80810,59311,44012,35513,34414,411Revenue
Growth52.4%22.6%8.0%8.0%8.0%8.0%8.0%8.0%8.0%Production CostsFixed
Production Expense (excl
depreciation)575575587598610622635648660674Variable Production
Costs2,0353,4044,2914,6695,0785,5216,0006,5197,0797,685Depreciation152152152152164178192207224242Total
Production
Costs02,7624,1315,0295,4195,8536,3216,8277,3737,9638,600Selling,
General &
Administrative1,2501,1551,7352,1022,2702,4522,6482,8603,0893,3363,603Total
Operating
Expenses1,2503,9175,8667,1327,6908,3058,9699,68710,46211,29912,203
Operating
Profit(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)7.7x8.3x12.7x12.7x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)30.8x30.9x31.0x31.0x31.0x31.0x31.0x31.0x31.0x31.0x
Capital Expenditures1,470952152152334361389421454491530
Balance SheetNetworking Capital
20102011201220132014201520162017201820192020Cash
135206252272294318343371400432Accounts receivable
7291,1121,3631,4721,5901,7171,8552,0032,1632,336Inventories359.6614583333500.1210653753396.0078740157426.7244094488460.8582677165497.7244094488537.5433070866580.5590551181626.9921259843677.157480315Accounts
Payable330.1180054795496.6010958904605.8844246575653.3084849315705.5752027397762.0134027397822.9799123288888.8315589041959.9251698631036.7280191781Networking
capital 8941,3211,4061,5181,6391,7711,9122,0652,2312,409
20102011201220132014201520162017201820192020Earnings before
income
taxes(1,250)5839941,2771,3921,5031,6231,7531,8932,0452,209Income
Taxes-233.12-397.6-510.92-556.72-601.24-649.384-701.308-757.32-818-883.4Net
operating profit after tax
(NOPAT)(1,250)3505967668359029741,0521,1361,2271,325Add back
depreciation of equipment 152152152152164178192207224242
Cash flow from operations
(1,250)5027499199871,0661,1521,2441,3431,4511,567
Capital
expenditures1,470952152152334361389421454491530Networking capital
to support
sales8008941,3211,4061,5181,6391,7711,9122,0652,2312,409Change in
Networking
capital(94)(427)(84)(113)(121)(131)(142)(153)(165)(178)2,409
Total cash flow(2,814)(878)5126545325756216707247823,446Terminal
Value48098.450924716Cash flow after terminal
value(2,814)(878)51265453257562167072478251,544Free cash flow
52,922
Discount rate7.7%
Net Present value @cost of capital24,273.65Internal Rate of
return 36%
SummaryNew Heritage Doll Company: Capital BudgetingExhibit
1Selected Operating Projections for Match My Doll Clothing Line
ExpansionWACCTerminal ValueNet Present
ValueIRR9%2%22,192.2437%9%1%19,359.0835%9%0.5%18,192.4934%8.4%2%25,669.0038%8.4%1%22,148.3636%8.4%0.5%20,722.2735%7.7%2%30,733.7639%7.7%1%26,105.6237%7.7%0.5%24,273.6536%
Exhibit 2 DYODNew Heritage Doll Company: Capital
BudgetingExhibit 2Selected Operating Projections for Design Your
Own
Doll20102011201220132014201520162017201820192020Revenue06,00014,36020,22221,43522,72124,08425,52927,06128,685Revenue
Growth139.3%40.8%6.0%6.0%6.0%6.0%6.0%6.0%Production CostsFixed
Production Expense (excl
depreciation)01,6501,6831,7171,7511,7861,8221,8581,8951,933Variable
Production
Costs02,2507,65111,42712,18212,98313,83314,73615,69416,712Depreciation0310310310436462490520551584Total
Production
Costs04,2109,64413,45414,36915,23116,14517,11318,14019,229Selling,
General &
Administrative1,20101,2402,9224,0444,2874,5444,8175,1065,4125,737Total
Operating
Expenses1,20105,45012,56617,49818,65619,77520,96222,21923,55324,966
Operating
Profit(1,201)05501,7942,7242,7792,9463,1233,3103,5093,719
Working Capital Assumptions:Minimum Cash Balance as % of
Sales3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%Days Sales
Outstanding59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2x59.2xInventory
Turnover (prod. cost/ending
inv.)12.2x12.3x12.6x12.7x12.7x12.7x12.7x12.7x12.7xDays Payable
Outstanding (based on tot. op.
exp.)33.7x33.8x33.9x33.9x33.9x33.9x33.9x33.9x33.9x
Capital Expenditures4,61003103102,1928268759289831,0431,105
