Advanced Finance
The project would attempt to evaluate the investment that has been proposed by HPL’s
manufacturing team. The primary question is on whether the investment required to increase
HPL’s manufacturing capabilities is warranted or not?
This project will also attempt to identify the challenges and risks involved in such an investment.The first and foremost risk comes from the fact that the company has not initiated a project of such a magnitude in quite a while and therefore the company is quite apprehensive inundertaking this investment. The other risk factors that this project attempts to address is the fact
that undertaking this investment would double the organization’s annual debt which its own set
of issues has related to it. In addition to all these risks, the returns on such an investment have to
be carefully analyzed.urther, the project will also try to evaluate the investment by taking stock of all the forecastinvolved in the private labeling market along with a look into the past 10 years worth of growthdata. It would also review some of the risk free returns that are available in the existing marketconditions. The project will also review the process that has been traditionally used by HPL toevaluate the various risks by estimating the compa
ny’s WACC as a discount rate for capital
budgeting projects. Also an NPV estimate will be used to calculate the risk involved.
Hansson Private Label is a corporation that manufactures an array of personal care products,including soap, shampoo, and the like, under the brand label of its retail partners. Recently
HPL’s largest retail partner proposed to them “significantly” increas
ing the share of their