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Hansson Private Label

In: Business and Management

Submitted By april9999
Words 551
Pages 3
Britt Sturm
Cases in Managerial Finance
Dr. Morris
November 9th, 2015
Hansson Private Label, Inc. (Pg. 151)

1. How would you describe HPL and its position within the private label personal care industry?

Hansson Private Label, Inc., (HPL) founded by Tucker Hansson in 1992 when he decided to purchase the manufacturing assets of Simon Health and Beauty Products. Hansson had background in branded personal care products and wanted to change his position in the market place. The personal care industry includes products such as, hand and body care, personal hygiene, oral hygiene, and skin care. U.S sales of this industry totaled $21.6 billion in 2007. The private label personal care industry is driven by five primary categories: mass merchants such as Walmart, club stores such as Sams Club and Costco, supermarkets such as Kroger, drug stores such as, Walmart and CVS, and lastly, dollar stores.
Manufactures had to persuade large chains to carry their product in such a highly competitive market. In order to better serve this highly competitive market, Hanson bought HPL for $42 million with, $25 million of his own money, and $17 million of money that he borrowed. Overtime, HPL grew at a conservative rate but had become a leader in the private label industry with four plants, which were all operating at 90% of capacity. HPL serves most of the major national and regional retailers as customers and has a dominant presence in the marketplace.

2. Using Exhibit 5 assumptions, construct a spreadsheet for the calculation of yearly free cash flows through 2018. Extra credit will be awarded if the spreadsheet is construct so the key assumptions can be changed to demonstrate the effect of changes on FCF.

3. Using CFO Sheila Dowling’s projected WACC schedule, what discount rate would you choose? Why does the beta increase with leverage?

According to Exhibit...

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