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Statement of the Problem

Emily Harris, Vice President of New Heritage Doll Company’s

(NHDC) production division, is faced wit a capital !udgeting

decision in mid"#eptem!er of $%&%' e company wants to

allocate te resources to strengten its innovative product

lines as well as drive future growt and prots' #e must

decide !etween two proposals, te *atc *y Doll Cloting

(**DC) e+pansion of a current line and te product

introduction of te Design our -wn Doll (D-D) line' #e

opes to use er team to analy.e !ot te /uantitative and

/ualitative factors of eac proposal to determine wic one

se sould present in te company’s !udgeting meeting'

Discussion

Harris is faced wit te dilemma of pic0ing one out of two

alternatives to propose, and tere are a certain 0ey metrics

tat must !e analy.ed in order to accurately determine te

long term impact of eiter proposal' 1t’s crucial to

understand tese metrics !efore applying tem to eiter

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proposal2 te factors !eing Net Present Value, 1nternal 3ate

of 3eturn, Pay!ac0 and Prota!ility' Net Present Value

discounts future cas 4ows to one value, and if tat value is

a!ove %, te pro5ect sould !e considered' is analysis

ta0es into consideration te time value of money, allowing

for te analysis to !e more in dept and accurate2 owever,

tis metod does not calculate 6wen7 te NPV will !e

positive and te model assumes tat resources are

a!undant, someting crucial to pro5ect implementation' e

1nternal 3ate of 3eturn, /uanties te return tat eac

pro5ect generates' is metod is widely accepted as it

/uanties return !y using

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