New Heritage Doll Company

Suggested Analysis Questions

1.Set forth and compare the business cases for each of the two projects under consideration by Emily Harris. Which do you regard as more compelling?

2.Use the operation projections for each project to compute a net present value (NPV) for each. Which project creates more value?

3.Compute the internal rate of return (IRR), payback period and profitability index for each project. How should these metrics affect Harris' deliberations (if at all)? How do they compare to NPV as tools for evaluating projects? When and how would you use each?

4.What additional information does Harris need to complete her analyses and compare the two projects? What specific questions should she ask each of the project sponsors?

5.Are the NPV, IRR and Profitability Index calculations particularly sensitive to certain factors/projections? How can you objectively assess this sensitivity?

6.If Harris is forced to recommend one project over the other, which should she recommend? Why? Are there are any real options considerations to think about?