New Heritage Projects Financial Analysis, Questionnaire Example

Question 1

New Heritage’s three divisions had the following projects:

Product Division

Toddler Accessory Line: this project involves developing a new line of accessories-carriages, cribs, carriers for an existing New Heritage Doll toddler doll line (‘My First Baby and Accessories’). Its intended target market is toddlers.

Match my Doll Clothing Line: this project involves developing clothing accessories to mimic real-life situations in which the doll character might find herself. This is for all existing doll lines.

Retail Division

Retail Store expansion in Northeast: this project involves building of retail presence in the Northeast, particularly in the Carolinas, Georgia and Florida. All these retail stores are experiential destinations.

Licensing Division

New doll Film/DVD: this project involves licensing rights to New Heritage’s branded doll characters and story lines to a new doll movie or TV show.

The selected discount rate is the expected rate of return that is required on any and all New Heritage investments. This rate has factored in the cost of inflation and as such is a reflection of what is the fundamental return that is required from the projects.

Question 2

The following is the collection of funded projects that I expect to be associated with good overall performance.

Product Division

Toddler Accessory Line: with a 24.80% IRR and 3.19 profit index, this will be the third best performing project. This is notwithstanding the fact that the product division has the second highest revenue levels for NH and has the largest portion of its total assets.

Retail Division

Retail Store Expansion in the Northeast: with a 34.83% IRR and 6.43 profit index, this will be the second best performing project for NH. This is owing to the fact that the retail division has the second largest portion of NH’s total assets. This division also rakes in the highest revenue for NH.

Licensing Division

New doll Film/DVD: with a 239.61% IRR and 9.91 profit index, this will be the best performing project for NH. This is owing to the fact that the licensing division has the highest cash flows and operational profit.

Question 3

My decisions and the optimal set were not different as these three project record the highest IRR and is far above the discount rate. These three projects are also in line with current market trends and fashions.