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Hansson Private Label , Inc (HPL) Evaluating an Investment in Expansion
Finance & Accounting
Pages 6 (1506 words)
Table of Contents Executive Summary 2 1.Introduction 3 2.Key issues and risks 3 2.1.Large size of investment 4 2.2.Short Payback Period 4 2.3.Large debt requirement 4 2.4.Intense Competition 4 2.5.Stagnant growth in market 5 2.6.Method of evaluation 5 3.Key positives 6 3.1.Huge customer base 6 3.2.Deterrent for other private label manufacturers 6 4.Financial Analysis 6 4.1.WACC and Discount Rate 6 4.2.Limitations of Dowling’s approach 7 4.3.Cash Flow and NPV analysis 9 4.4.Validation of Gate’s projections and Sensitivity Analysis 9 5.Key Options & Recommendations 13 References 14 Executive Summary The report assesses the situation of a company Hanson Private Limited (HPL), which produces
This would require an investment above $50,000 by HPL which is unprecedented in its history. Hanson’s executives have made cash flow and WACC projections using their traditional estimates as well as some external consulting with banks etc. However, Trucker Hanson is not sure of their methodologies and needs to review it. The initial part of the report performs a qualitative analysis of the company where the key risks and positives for the company are identified. The report then delves into financial analysis where the WACC and cash flow calculations are done. The limitations of these analyses are also discussed. Thereafter, the sensitivity of NPV to various factors is discussed. Finally, the key options in front of Hanson and the corresponding recommendations are discussed. 1. Introduction Hansson Private Label (HPL) is a firm which is exclusively into the manufacturing of private label products for large retailers and supermarkets. ...
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