Use the operating projections and other assumptions provided for each project to compute the net present value (NPV)

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

1. Use the operating projections and other assumptions provided for each project to compute the net present value (NPV), internal rate of return (IRR), payback period, 5 year cumulative EBITDA, and profitability index for each using the template provided. Write a brief report (2 – 3 pages 1.5 spacing not including title, contents, exhibits) that answers the following questions:

2. Which project creates more value? Why?

3. How do the IRR, payback period, 5 year cumulative EBITDA, and profitability index compare to NPV as tools for evaluating projects? When and how would you use each?

4. If Harris is forced to recommend one project over the other, which should she recommend? Why? 5. Elizabeth Holtz, brand manager for the Heirloom Dolls division planned to use existing IT staff to develop the web-based software tools and order entry system required for the Design Your Own Doll Project. These costs were not included in the initial outlays or forecast presented as the development personnel Holtz needed were considered “corporate” resources. Do you agree or disagree? If these costs were included would it change your answer to question 4?

The entire case should be written up via a business report format. Place all your answers in a word document and submit your word document to Moodle using the assignment submission procedure below. You may include one supplemental excel workbook with your document submission. Will Upload Document. Answer questions using the excel sheet provided. Please make sure the answers on the excel sheet are correct. This should be in report format. An example is attached.

 

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