Hansson Private Label Case Study
Abstract
This project is to identify and analyze HPL (Hansson Private Label ) company’s new investment decisions based on a series of calculations include: Operating Cash Flows (OCF), Net Present Value (NPV), Internal Rate of Return (IRR), and Sensitivity Analysis. The analysis suggests that Hansson should be very cautious regarding the investment proposal that is developed by his manufacturing team. Although the projections and analysis of the project for the next 10 years proposed by Robert Gates seems reasonable and will generate positive NPV and an IRR greater than the discount rate, NPV is very sensitive with regard to unit volume and unit selling price changes. A decrease in the projected unit volume and selling price might produce a negative NPV.
Company Background and Performance Analysis
The Hansson Private Label (HPL), started in 1992 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, 2010). Over the years, HPL has grown steadily under Hansson’s conservative expansion strategy, which is to expand only when Hansson makes sure that the capacity with any new facility should be at least 60% (Stafford, Heilprin, and Devolder, 2010). Right now, the four plants of HPL are all operating at 90% capacity, and the business generated 681 million in revenue in 2007.
The market for personal care industry is mainly driven by the unit selling price, which has increased by an average of 1.7% each year in the past four years. Unit volume has increased less than 1% annually. Taking down to the company level, we can see that HPL has been growing steadily with revenue increases by about 35% in 2007 compared to 2003. The company has maintained an average growth of 8% in revenue throughout the five years. The net income has also grown by 33% from 2003 to 2007. Net
This project is to identify and analyze HPL (Hansson Private Label ) company’s new investment decisions based on a series of calculations include: Operating Cash Flows (OCF), Net Present Value (NPV), Internal Rate of Return (IRR), and Sensitivity Analysis. The analysis suggests that Hansson should be very cautious regarding the investment proposal that is developed by his manufacturing team. Although the projections and analysis of the project for the next 10 years proposed by Robert Gates seems reasonable and will generate positive NPV and an IRR greater than the discount rate, NPV is very sensitive with regard to unit volume and unit selling price changes. A decrease in the projected unit volume and selling price might produce a negative NPV.
Company Background and Performance Analysis
The Hansson Private Label (HPL), started in 1992 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, 2010). Over the years, HPL has grown steadily under Hansson’s conservative expansion strategy, which is to expand only when Hansson makes sure that the capacity with any new facility should be at least 60% (Stafford, Heilprin, and Devolder, 2010). Right now, the four plants of HPL are all operating at 90% capacity, and the business generated 681 million in revenue in 2007.
The market for personal care industry is mainly driven by the unit selling price, which has increased by an average of 1.7% each year in the past four years. Unit volume has increased less than 1% annually. Taking down to the company level, we can see that HPL has been growing steadily with revenue increases by about 35% in 2007 compared to 2003. The company has maintained an average growth of 8% in revenue throughout the five years. The net income has also grown by 33% from 2003 to 2007. Net