Essay on New Heritage Company

3999 Words Dec 12th, 2012 16 Pages
NEW HERITAGE DOLL COMPANY
Capital Budgeting

NEW HERITAGE DOLL COMPANY
Capital Budgeting

Brief Case

Brief Case

Brief Case

Brief Case

Brief Case

Brief Case

Brief Case

Brief Case

To: CFO (New Heritage Doll Company)
From:
Date: 11/16/12
RE: NEW HERITAGE DOLL COMPANY

To: CFO (New Heritage Doll Company)
From:
Date: 11/16/12
RE: NEW HERITAGE DOLL COMPANY

Here a composite report is advanced on the toy industry, New Heritage Doll Company and the evaluation of its investment projects.
Here a composite report is advanced on the toy industry, New Heritage Doll Company and the evaluation of its investment projects.

Index
Index

| | 1. Introduction | 4 | | | | | | | 2. The
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4. The implication of long term investment decisions are more extensive than those of short run decisions because of time factor involved, capital budgeting decisions are subject to the higher degree of risk and uncertainty than short run decision.

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4.4 Capital Budgeting at New heritage Doll Company
Currently the capital budgeting process in New Heritage is conducted by a panel consisting of the CEO, the CFO, the COO, the controller and the division of presidents.

Historically, capital budgeting was about 15% of Ebitda. Three formal methods are used in New Heritage capital budgeting: 1. Net Present value (NPV). 2. Payback period. 3. Internal rate of return (IRR). These methods use the incremental cash flows from each potential investment, or project. Under accrual accounting, revenues and expenses are reported based on accounting principles. This means that revenues are reported when they are earned, and expenses are matched to the periods of the revenue. In other words, revenues and expenses are not reported on the income statement when the money is received or spent. Further, the revenue and expense amounts are not adjusted for the time value of money because of the monetary unit assumption. Capital budgeting decisions should be based on cash flows that are adjusted for the time

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