Match My Doll Clothing Line Vs. Design Your Own Doll

Compare the business cases of the two projections under consideration by Emily Harris. Add (and make explicit) your own additional assumptions and argue on the basis of that which of the two cases you find more compelling.

Match My Doll Clothing Line vs. Design your own doll:

The Match My Doll Clothing Line has the following positives, there will be no cannibalization of existing products in the New Heritage Doll line. The target markets of girls ages 4-12 will want to dress like their dolls and if they don’t have the dolls they will want to purchase the dolls and the clothing to match the dolls. There will be new offerings at the existing product line in terms of clothing for both dolls and humans. Match My Doll is a more compelling business case with less risk.

Although Design your Own doll has a higher net income of $2114 and Match My Doll has a lower average net income $1275, and it is also great for girls to have dolls that look like them, by creating a one of a kind doll, which is a powerful statement for young women, it is the more risky choice. The breakeven point is expected to be high, the production run is expected to be low and the payback period is also very long.

2. Use the operating projections including some of your own assumptions for each project to compute the Net Present Value of the two projects. Which creates more value?

Match My Doll Clothing Line vs. Design your own doll:

NPV: (127)                                        NPV: (3,137)

3. Compute the internal rate of return and the payback period and compare with your decision on basis of NPV.

Match My Doll Clothing Line vs. Design your own doll:

IRR: 7.74%                                         IRR: 0.064%

Payback Period: 7.5 years                         Payback Period: 10 years

4. If Harris is forced to recommend one project over the other, which should she recommend?