It is important to login to the Simulation as soon as possible to ensure you have access. You can try to do this as soon as class starts.
Acting as the executive team for a small company, your team will apply the principles of capital budgeting to invest in growth and cash flow improvement opportunities in three phases over 10 simulated years. Each opportunity has a unique financial profile and you must analyze the effects on working capital. Examples of opportunities include taking on new customers, capitalizing on supplier discounts, and reducing inventory.
The team must understand how the income statement, balance sheet, and statement of cash flows are interconnected and be able to analyze forecasted financial information to consider possible effects of each opportunity on the firm's financial position. The company operates on thin margins with a constrained cash position and limited available credit. You must optimize use of internal and external credit as you balance the desire for growth with the need for maintaining liquidity.
Sign-in to the Harvard Business Simulation and review each of the following:
- Welcome Statement
- How to Play
- Terminology Primer
- More Details (this includes information to help you understand how to play the simulation)
Complete the Harvard Business Simulation individually and track and save your results.
Create an approximately 1,050-word analysis of the team members' decisions during each phase (1-3) and how they influenced each member's final results.
- Analyze the influence of member's decisions on sales outcomes or metrics of SNC.
- Analyze the influence of member's decisions on EBIT outcomes or metrics of SNC.
- Assess the influence of member's decisions on Net Income outcomes or metrics of SNC.
- Analyze the influence of member's decisions on Free Cash Flow outcomes or metrics of SNC.
- Assess the influence of member's decisions on Total Firm Value outcomes or metrics of SNC.
- Each team member should submit a summary of the above to the Learning Team discussion area in order to be eligible for full credit. However, it is not necessary to incorporate every team member's submission into the final team paper. It is better to agree on one and use that as the basis for your team paper.
- If necessary, you can access the simulation you did via the run archive link at the bottom. Within the sections under analyze, you can click the copy button and then paste the data into excel as needed.
As the CEO and the head of New Heritage's capital committee, you will decide which projects should receive funding. The company's managers propose more projects for consideration than can be funded. As a result, some investments having positive present values at the appropriate cost of capital are rejected due to the limit on available capital. It is therefore necessary for the capital committee to select the best set of investments from the pool of available investment options in any given fiscal year.
The Board of Directors sets an annual limit on dollar funding for capital projects. This limit is based on a percentage of EBITDA generated in the prior fiscal year in addition to a fixed funding amount based on the firm's internal resources, its ability to raise additional capital and organizational constraints. Acquisitions and very large investments are funded by the acquisition of additional debt and these investments were not funded from the general capital investment pool.
Given the capital rationing situation at New Heritage, you will be unable to invest in all proposals, even if they are value-creating and exceed risk-adjusted hurdle rates. Your task is to evaluate proposed projects using the financial and qualitative information provided and to select projects to be approved for a given year's investment plan using any evaluation criteria you deem appropriate. You will be required to monitor your selected investments, evaluate new investment proposals and submit annual capital plans over a period of 5 years, from 2010 - 2014. Most projects are available for investment during more than one fiscal period.
In this simulation you are playing the CEO of New Heritage Doll Company and must decide which investment projects will receive funding in the next five years. You will be presented with several different projects across three main divisions: retail, production, and licensing. Your task is to evaluate and select projects using the financial and qualitative information provided in order to generate financial growth for your company.
The steps to play are:
1. Review the prepare tab where you'll learn about New Heritage and its corporate strategy.
2. Navigate to the analyze tab to view detailed financial reports at the divisional and company levels. Here you can also evaluate projections for each of the available projects.
3. Proceed to the decide tab to submit your final project decisions for that year.
4. The simulation advances to the next year and presents the financial results of your investments.
Repeat steps 1-3 for the remaining four years of the simulation. More detailed information how to navigate the simulation can be downloaded here or viewed as a screen capture movie on the intro video screen.
Attachment:- Capital Budgeting Assignment.rar