Hansson private label case

Hansson Private Label – Case Questions

1. How would you describe Hansson Private Label (HPL) and its position within the private label personal care industry? Compare HPL’s size, profitability (profit margin), growth rate, and leverage (debt ratio) with its peers and discuss your findings. (Note: You are not given revenue growth rate for the peers, but the case talks about industry growth rate)

2. Discuss the motivation and strategic rationale for the possible expansion. What are the potential risks and rewards?

3. Using assumptions made by Executive VP of Manufacturing, Robert Gates, estimate the project’s cash flows. Are Gates’ projections realistic? If not, what changes might you incorporate? Do a sensitivity analysis with the assumption that both prices and expenses grow at a rate of 3% (i.e., recalculate cash flows and NPV with this assumption).

4. Using CFO Sheila Dowling’s projected WACC schedule, what discount rate would you choose? Explain.

5. Estimate the project’s NPV. Would you recommend that Tucker Hansson proceed with the investment? Explain.

Notes:

1. Use the Excel spreadsheet provided for calculations. The spreadsheet also has some explanations about the assumptions. First seven sheets are the Exhibits of the case. You can use the sheet titled “Projections” to calculate project’s incremental after-tax cash flows. You can use the sheet titled “Net Working Capital” to calculate net working capital (which in turn will be used in incremental after-tax cash flow calculations). You may add more sheets to the excel file as necessary.

2. In a separate word document provide answers to the case questions above.

3. Upload both documents on Blackboard. One upload per group please. Please make sure that the word document and the excel spreadsheet have the names of all the members of the group.

4. I will try to help you as much as I can with the case. You can send me a list of questions about the case and I will answer them as much as I can. But I will not correct your case before you hand it in (i.e., I cannot point out your mistakes if you send me a spreadsheet).

5. Timely submission of the case is very important. Late submissions will be penalized.