If the assumption of perpetuity is removed and a case arises where the Company needs to sell its asset, how

difference in net present value will be there. Here the Terminal Value will therefore be equal to book value

Match My Doll
Growth rate
Discount rate 0% 1% 2% 3%
7.70% $ 5,289 $ 6,141 $ 7,292 $ 8,932
8.40% $ 4,408 $ 5,075 $ 5,950 $ 7,150
9.00% $ 3,766 $ 4,314 $ 5,019 $ 5,958

Design Your Own Doll

Growth rate
Discount rate 0% 1% 2% 3%
7.70% $ 5,830 $ 7,263 $ 9,198 $ 11,957
8.40% $ 4,404 $ 5,526 $ 6,998 $ 9,016
9.00% $ 3,372 $ 4,294 $ 5,479 $ 7,058
ny needs to sell its asset, how much
erefore be equal to book value

NPV
$ 3,011
$ 2,687
$ 2,425

NPV
$ 3,567
$ 2,980
$ 2,507
Total initial investment = 3,520,000
2010 2011 2012
Revenue 4,500 6,860
Revenue Growth NA 52.4%
Production Costs
Fixed Production Expense (excl depreciation) 575 575
Variable Production Costs 2,035 3,404
0.4522 0.4962
Depreciation 152 152
Total Production Costs 0 2,762 4,131
Selling, General & Administrative 1,250 1,155 1,735
Total Operating Expenses 1,250 3,917 5,866

Operating Profit (1,250) 583 994

Operating Profit/Sales 0.130 0.145
SG&A/Sales 0.257 0.253

Working Capital Assumptions:

Minimum Cash Balance as % of Sales NA 3.0% 3.0%
Days Sales Outstanding NA 59.2x 59.2x
Inventory Turnover (prod. cost/ending inv.) NA 7.7x 8.3x
Days Payable Outstanding (based on tot. op. exp.) 0.0x 30.8x 30.9x

Capital Expenditures 1,470 952 152

NPV Analysis

First we should find out the final cash flow

Net Working Capital Account 2010 2011 2012

Cash Required 135 205.8
Credit on Sales (Account receivable) 729.4931507 1112.071781
Inventory 359.6614583 500.1210654
Account Payable 317.2915068 483.7162192
Net Working Capital 800 906.8631022 1334.276627
Incremental Net Working Capital 106.8631022 427.4135249

Total Cash Flows 2010 2011 2012

(-) Incremental Net Working Capital 800 106.8631022 427.4135249
(+) Earning after tax -750 349.68 596.4
(+) depreciation 0 152 152
(-) capital expenditure 1,470 952 152
Cash Flow (3,020) (557) 169

Let Perpetural Growth Rate Value 3%

Discount rate For Medium Risk = 8.40%
0 1 2
Present Values of Cash Flows (3,020) -514.006552 143.8114227
Net Present Value(terminal value included) 7,150
Net Present Value without Terminal Value -146.198131

Payback Analysis The time by which the investment will be returned

 2010 2011 2012
Cash Flows (3,020) (557) 169
Cumulated Cash (3,020) (3,577) (3,408)

Payback Period is between 2017 and 2018 i.e 7 and 8 years Approximately

Profitability Index npv / Initial investment 2.367573643

EBITDA 6,522
 2013 2014 2015 2016 2017 2018 2019
8,409 9,082 9,808 10,593 11,440 12,355 13,344
22.6% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

587 598 610 622 635 648 660

4,291 4,669 5,078 5,521 6,000 6,519 7,079
0.5103 0.5141 0.5178 0.5212 0.5245 0.5276 0.5305
152 152 164 178 192 207 224
5,029 5,419 5,853 6,321 6,827 7,373 7,963
2,102 2,270 2,452 2,648 2,860 3,089 3,336
7,132 7,690 8,305 8,969 9,687 10,462 11,299

1,277 1,392 1,503 1,623 1,753 1,893 2,045

0.152 0.153 0.153 0.153 0.153 0.153 0.153
0.250 0.250 0.250 0.250 0.250 0.250 0.250

3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

59.2x 59.2x 59.2x 59.2x 59.2x 59.2x 59.2x
12.7x 12.7x 12.7x 12.7x 12.7x 12.7x 12.7x
31.0x 31.0x 31.0x 31.0x 31.0x 31.0x 31.0x

152 334 361 389 421 454 491

2013 2014 2015 2016 2017 2018 2019

252.264 272.445 294.24 317.7798 343.2021 370.656 400.311
1363.147112 1472.198233 1589.970849 1717.171759 1854.545046 2002.896395 2163.141723
396.007874 426.7244094 460.8582677 497.7244094 537.5433071 580.5590551 626.992126
592.9536795 640.3777397 691.6079589 746.9331973 806.6932904 871.2365699 940.9283589
1418.465307 1530.989903 1653.461158 1785.742772 1928.597163 2082.87488 2249.51649
84.18867987 112.5245957 122.4712555 132.2816135 142.8543913 154.2777168 166.6416106

2013 2014 2015 2016 2017 2018 2019

84.18867987 112.5245957 122.4712555 132.2816135 142.8543913 154.2777168 166.6416106
766.38 835.08 901.86 974.076 1051.962 1135.98 1227
152 152 164 178 192 207 224
152 334 361 389 421 454 491
682 541 583 630 680 735 793

Terminal Value =
3 4 5 6 7 8 9
535.5725907 391.7818702 389.7060832 388.2942742 386.8123688 385.3693157 383.9375742
 2013 2014 2015 2016 2017 2018 2019
682 541 583 630 680 735 793
(2,726) (2,185) (1,602) (972) (291) 443 1,237

no of days 144.5687627 0.396078802 = 7.39 years

 2020
14,411
8.0%

674
7,685
0.5332
242
8,600
3,603
12,203

2,209
0.153
0.250

3.0%
59.2x
12.7x
31.0x

530

2020
432.336
2336.19371
677.1574803
1016.210444
2429.476746
179.9602557

2020
179.9602557
1325.1
242
530
857

16345.33216
10
7678.793453
 2020
17,202
18,439
 2010 2011 2012
Revenue 0 6000
Revenue Growth NA
Production Costs
Fixed Production Expense (excl depreciation) 0 1650
Additional development costs (IT personnel) 435
Variable Production Costs 0 2250
Depreciation 0 309.7
Total Production Costs 0 435 4209.7
Selling, General & Administrative 1201 0 1240
Total Operating Expenses 1201 435 5449.7

Operating Profit -1201 -435 550.3

Operating Profit/Sales 0.091716667
SG&A/Sales 0.206666667

Working Capital Assumptions:

Minimum Cash Balance as % of Sales NA NA 0.03
Days Sales Outstanding NA NA 59.17
Inventory Turnover (prod. cost/ending inv.) NA NA 12.18
Days Payable Outstanding (based on tot. op. exp.) NA NA 33.67

Capital Expenditures 4610 0 309.7

NPV Analysis

Net Working Capital Account 2010 2011 2012

Cash Required 180

Credit on Sales (Account receivable) 972.6575342
Inventory 345.6239737
Account Payable 474.1473973
Net Working Capital 1000 1024.134111
Incremental Net Working Capital 24.13411071

Cash Flows 2010 2011 2012

(-) Incremental Net Working Capital 0 1000 24.13411071
(+) Earning after tax -720.6 -261 330.18
(+) depreciation 0 0 310
(-) capital expenditure 4,610 0 310
Total Cash Flow (5,331) (1,261) 306

Let Perpetural Growth Rate 3%

Discount rate For Medium Risk = 9.00%
2010 2011 2012
0 1 2
Present Value -5330.6 -1156.88073 257.592702
Net Present Value 7058.257835
NPV without Terminal Value -3391.01822
Finding Payback Period
2010 2011 2012
Cash Flows including terminal value (5,331) (1,261) 306
(5,331) (6,592) (6,286)

Payback period more than 10 years

Profitability Index
npv / initial investment 1.324101946

EBITDA 8777.7008
 2013 2014 2015 2016 2017 2018 2019
14360 20221.6 21434.8 22720.9 24084.2 25529.3 27061
1.393333333 0.408189415 0.059995253 0.06000056 0.060002025 0.060001993 0.059997728

1683 1716.6 1750.9 1786 1821.7 1858.1 1895.3

7651 11427.3 12181.6 12982.6 13833 14735.8 15694.3

309.7 309.7 436.2 462.4 490.1 519.5 550.7
9643.7 13453.6 14368.7 15231 16144.8 17113.4 18140.3
2922 4044.32 4286.9792 4544.197952 4816.849829 5105.860819 5412.212468
12565.7 17497.92 18655.6792 19775.19795 20961.64983 22219.26082 23552.51247

1794.3 2723.68 2779.1208 2945.702048 3122.550171 3310.039181 3508.487532

0.124951253 0.134691617 0.129654618 0.129647243 0.129651397 0.12965648 0.129651067
0.203481894 0.2 0.200000896 0.20000079 0.200000408 0.200000032 0.200000461

0.03 0.03 0.03 0.03 0.03 0.03 0.03

59.17 59.17 59.17 59.17 59.17 59.17 59.17
12.27 12.63 12.72 12.72 12.72 12.72 12.72
33.8 33.94 33.94 33.94 33.94 33.94 33.94

309.7 2191.5 825.7 875.3 927.8 983.4 1042.5

2013 2014 2015 2016 2017 2018 2019

430.8 606.648 643.044 681.627 722.526 765.879 811.83

2327.893699 3278.115266 3474.786619 3683.275762 3904.279764 4138.544332 4386.847589
785.9576202 1065.209818 1129.61478 1197.40566 1269.245283 1345.393082 1426.124214
1134.939178 1598.269005 1694.161984 1795.825651 1903.573702 2017.780499 2138.853466
2409.712141 3351.704079 3553.283415 3766.482771 3992.477345 4232.035914 4485.948337
1385.57803 941.991938 201.5793366 213.199356 225.9945741 239.5585686 253.9124226

2013 2014 2015 2016 2017 2018 2019

1385.57803 941.991938 201.5793366 213.199356 225.9945741 239.5585686 253.9124226
1076.58 1634.208 1667.47248 1767.421229 1873.530103 1986.023509 2105.092519
310 310 436 462 490 520 551
310 2,192 826 875 928 983 1,043
(309) (1,190) 1,076 1,141 1,210 1,283 1,359

Terminal value
2013 2014 2015 2016 2017 2018 2019
3 4 5 6 7 8 9
-238.603174 -842.731252 699.5816879 680.5329422 661.8214647 643.6760949 625.8963594
 2013 2014 2015 2016 2017 2018 2019
(309) (1,190) 1,076 1,141 1,210 1,283 1,359
(6,595) (7,784) (6,708) (5,566) (4,357) (3,074) (1,715)
 2020
28684.7
0.060001478

1933.2

16711.8
583.8
19228.8
5736.945216
24965.74522

3718.954784
0.129649422
0.200000182

0.03
59.17
12.72
33.94

1105

2020

860.541
4650.064929
1511.698113
2267.186906
4755.117136
269.1687995

2020
269.1687995
2231.37287
584
1,105
1,441

24737.23655
2020
10
11057.97174
 2020
26,178
24,464
 NPV (in '000) Payback period Profitability Index
MMDC 7150 7.4 years 2.37
DYOD 7058 10+ years 1.32

Both projects have positive NPV but MMDC has more NPV. MMDC also has higher PI and more
attractive PB period. Therefore New Heritage should proceed with the proposal of Make My Doll
Clothing
 EBITDA( In thousand)
6522
8777

MMDC also has higher PI and more

d with the proposal of Make My Doll