This is something that the firm can control, so the assumption is reasonable. While it would increase its dependence on a single customer, this expansion may also give Hansson the opportunity to increase its bargaining power with other customers, as it would not be as dependent on their business.
NPV is calculated using present value of future cash flows and the initial investment. Thus, Hansson private label case essay the project to be profitable, the company must take it well beyond the three-year time horizon.
Under this situation, the subject of this report is to evaluate the potential investment of expanding production capacity at Hansson Private Label HBL and make a recommendation to Tucker Hansson. Currently, Hansson is facing a new investment opportunity initiated by its largest retail customers that could take the business into the next level and significantly increase its Hansson private label case essay force in the private label industry.
If HPL is able to incorporate the innovative packaging into its program, the company will be more competitive and take more market share even after the contract with its customer expires.
Hansson is subject to strong steady growth, which would imply a lower level of risk, but the company is set to increase its leverage and is also going to increase its dependence on a single customer. In this paper, we only test the sensitivity on price and volume changes.
However, the competition of this kind of products is fierce and the current capacity of HPL is getting close to full. The decision is risky. WCC has a lower level of leverage as well. The current SGA expense to revenue is 7.
This allows the retailer to simultaneously offer the product at a lower price and for the retailer to earn more profit per unit on that product. The estimate would then be used in the capital asset pricing model.
That all been said, Hansson should consider the suggestion of incorporate innovative packaging into its product line if Hansson were to take this project after careful evaluation of the financial and non-financial risks.
These figures deviate far from those in the otherwise normal scenario, which also suggests that NPV and IRR are quite sensitive to changes in the unit volume.
Cost of equity is However, a little fluctuation in unit selling price has a big impact on the cash flows and net present value.
His estimates for increased labor are probably also higher than they should be, as are his estimates for increased SGA expenses. The decision would allow Hansson to increase its position within the private label industry.
Retailers could also offer private label goods at lower prices than branded goods. Free Cash Flows Robert Gates has provided estimates and assumptions that can be used to estimate the free cash flows associated with this project.
HPL and private label personal care industry HPL is a midsize manufacturer of private label personal care products that sold under the brand label of its retail customers which included supermarkets, drug stores and mass merchants.
Most of these faults relate to the fact that the WACC is based on current figures. So, in another work, these projections are not accurate. This expansion is a major expansion of the firm therefore the cost of capital is impacted by two things that will change significantly if the firm undertakes this project.
They are also growing concerns that are increasing their market share over time. However, I find that these assumptions are not realistic. If HPL cannot operate at the projected capacity, the value of the company will be largely decreasing, and put the company at danger.
Drug stores have an The firm value level is also not expected to change significantly -- if anything the retained earnings will increase firm value. Costco also has similar characteristics. His assumption that this increased capacity will require four new managers at the outset, expanding to eight, is conservative.
Secondly, this important customer is only willing to commit to a three year contract with HPL. Currently, Hansson is nearing its production capacity. Depreciation is included in the net income because it is tax deductible, and then it is added back because depreciation is a non-cash expense and should be added back to the cash flow statements.
The sensitiveness of NPV in regards to the selling price will be discussed in detail in the sensitivity analysis session.
However, this investment is not without significant risks. However, the downside of this option is that the cost of equity is higher than the cost of debt. First and for most, Hansson would need additional debt to finance the new projects.
The benefits of innovative packaging would allow HPL stands firmly in its competing position against the competitors. This is the part where uncertainty problem lies. FCF is important for a company since a company can use this money to enhance its productivity.
If Gates has underestimated these expenses, that would be a far greater fault.Case Analysis on Apple Inc Essay. is important to define and analyze the current position that Apple in terms of its internal and external environment in order to gain a detailed picture of Apple itself, its industry and the strength and weakness associated with them.
Essay about Hansson Private Label Case Study: Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility Final Project by Rodrigo Montechiari Company´s Business Operations, Strategy and Past Performance HPL is a manufacturer of personal care products for.
Case Study: Hansson Private Label, Inc. Executive Summary The owner of Hansson Private Label (HPL) must determine whether or not to accept an aggressive expansion project that would preclude the company from pursuing any alternative investment opportunities for several years.
Hansson Private Label Case Study Case Study: Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility Company´s Business Operations, Strategy and Past Performance HPL is a manufacturer of personal care products for retail partners.
Case Study – Project Proposal Case Study for Hansson Private Label, Inc.: Evaluating an Investment and Expansion Company profile Hansson Private Label (HPL) started inis the manufacturer of personal care products under the brand label of its retailers.
The Hansson Private Label (HPL), started in when Tucker Hansson bought over Simon Health and Beauty Products with 42 million (17 million with debt), is a company that manufactures personal hygiene products including soap, shampoo, sunscreen, mouthwash, and shaving cream (Stafford, Heilprin, and Devolder, ).Download