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Copy of Hansson Private Label, Inc. - Go Big or Go Home

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Andrew Leszczewski

on 14 January 2014

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Transcript of Copy of Hansson Private Label, Inc. - Go Big or Go Home

Hansson Private Label, Inc. - Go Big or Go Home

Christina Bowes, Andrew Leszczewski, and Tibu Mathew
MGT 500 – Case Studies in Management
Facilitator Dennis J. Michaels, CPA
January 7, 2014

Introduction
The Situation
Tucker Hansson looking over a proposal

Invest $50 Million to expand production capacity

HPL's Biggest customer tells Hansson about its plans

Weighing the risks with the benefits
Company History
Started in 1992 when Hansson purchased it from Simon Health & Beauty Products

HPL was bought for $42 million

Hansson's largest investment would be this expansion proposal

HPL was a company that grew methodically up until now
Main Characters
Tucker Hansson

Robert Gates

Sheila Dowling
Case Issues
Speedy go or no go decision to be made

Choice of financial evaluation method

Financial Analysis
Financial Analysis
Financial Analysis
Financial Analysis
Financial Analysis
Financial Analysis
Financial Analysis
Financial Analysis
Assumes 10 years of production, aligning with the 10 year estimated lives of both the manufacturing and packaging equipment.

Assumes that the price of the goods can continue to grow year over year at ONLY 1.7%

Assumes that the cost of raw materials will grow at 1.25% per year.

Assumes Utilization will begin year 1 at 60% and increase year over year up to 85%

Assumes that our sales continue to rise with the production, especially past year 3 (Signing only a 3 yr contract)
Industry Status
$21.6 Billion in 2007
Consumer Trends
Marketing
Economic Trends
Recommendation
Questions
???????
References
May, R. (2003). Rise of the Store Brands. Business Pundit website accessed 01/11/14. http://www.businesspundit.com/rise-of-the-store-brands/

Nielson Website (2010). Store Brands Tally Historic Market Share Gains. Website accessed on 01/11/14. http://www.storebrandsdecisions.com/news/2010/04/06/store-brands-tally-historic-market-share-gains

Stafford, E., Heliprin, J., & Devolder, J. (2010). Hansson Private Label, Inc.: Evaluating an Investment in Expansion. Harvard Business School brief cases.


Consumer Trends
Assumes 10 years of production, aligning with the 10 year estimated lives of both the manufacturing and packaging equipment.

Assumes that the price of the goods can continue to grow year over year at 2.0%

Assumes that the cost of raw materials will grow at only 1.0% per year.

Assumes Utilization will begin year 1 at 60% and increase year over year up to 85%

Assumes that our sales continue to rise with the production, especially past year 3 (Signing only a 3 yr contract)

NPV Calculation #1
Assumes 10 years of production, aligning with the 10 year estimated lives of both the manufacturing and packaging equipment.

Assumes that the price of the goods can continue to grow year over year at 2.0%

Assumes that the cost of raw materials will grow at only 1.0% per year.

Assumes Utilization will begin year 1 at ONLY 50% and increase year over year up to 85%

Assumes that our sales continue to rise with the production, especially past year 3 (Signing only a 3 yr contract)

NPV Calculation #2
Assumes 10 years of production, aligning with the 10 year estimated lives of both the manufacturing and packaging equipment.

Assumes that the price of the goods can continue to grow year over year at ONLY 1.7% (historical increase)

Assumes that the cost of raw materials will grow at only 1.0% per year.

Assumes Utilization will begin year 1 at 60% and increase year over year up to 85%

Assumes that our sales continue to rise with the production, especially past year 3 (Signing only a 3 yr contract)

NPV Calculation #3
NPV Calcualtion #4
Financial Analysis
Full transcript