Case: Hansson Private Label, Inc.: Evaluating an Investment in Expansion (critical essay)
Read the Hansson Private Label, Inc.: Evaluating an Investment in Expansion case study.
A manufacturer of private-label personal care products must decide whether to fund an unprecedented expansion of manufacturing capacity. The decision prompts fundamental financial analysis of the potential project, including development of cash flow projections and net present value calculations. Students will be required to compute net operating profit after tax, cash investment in working capital, and ongoing capital expenditures for a proposed investment, and to discount values to the present. The case also facilitates a systematic consideration of the company's capital planning process.
Write a 5- to 6-page paper that addresses the following:
- How would you describe HPL and its position within the private label industry?
- Using the assumptions made by the Executive VP of Manufacturing, Robert Gates, estimate the project's FCFs. Are Gates' projections realistic? If not, what changes might you incorporate?
- Using CFO Sheila Dowling's projected WACC schedule, what discount rate would you choose? What flaws, if any, might be inherent in using the WACC as the discount rate?
- Estimate the project's NPV. Would you recommend that Tucker Hansson proceed with the investment?
Your paper should meet the following requirements:
- 5 to 6 pages in length, not including title and reference pages
- Formatted according to the CSU-Global Guide to Writing and APA Requirements
- Include at least 3 credible outside reference sources