Case 1

STAFF ANALYSIS/RECOMMENDATION QUESTIONS

1. What are the unique characteristics, if any of the personal goods market which might have a bearing on this investment decision?

2. What are the positive and negative characteristics of the private label segment that impact potential returns on investment for manufacturers? Is private label manufacturing an attractive industry? Why or Why not?

3. What would you consider to be the biggest risk Tucker Hansson will take if he makes this investment?

4. How would you calculate the total project cash flows, net present value (NPV), and internal rate of return (IRR) given the supplied project forecasts? Show your work in preparing the following:

a. a ten year generation of cash flow forecasts from project assumptions.

b. calculation of net present value by discounting the forecasted cash flows.

c. calculation of internal rate of return.

For question #4a, b, & c you are to compose a narrative answer as to how you would go about calculating the answers but forget about completing a spreadsheet or any other numeric answers for question #4.

NOTE: Part of this question requires narrative answers and part requires numeric answers. For full credit on numeric questions clearly label your work and show your work in computing the numeric answers. Probably the easiest solution to the numeric answers is to build an Excel spreadsheet and clearly label your answers.

5. What factors would you consider and how would you determine the potential discount rates to use in you calculations in question #4 above?

6. What are some other options that Hansson might take to satisfy his largest customers without making this $50 million investment?

7. Executive Summary – In addition to answering the six questions listed above prepare a separate (one to two page) Executive Summary of your recommendations to Tucker Hansson, the owner of Hansson Private Label, Inc.

Executive Summary

Usually one to two pages in length. No...