Hansson Private Label is a corporation that manufactures an array of personal care products,lunging soap, shampoo, and the like, under the brand label of Its retail partners. Recently HAPS largest retail partner proposed to them “significantly’ Increase inning the share of their privately manufacturing. This, however, would require an initial investment of $45,000 to expand discriminating capabilities, plus a $1 2,817 Increase In working capital. In order for HOP toecap or reject this expansion reports, a return on the potential Investment, plus the extemporaneously risks, needs to be considered.
These would, in turn, be contrasted with other opportunities that HOP can also consider, such as finding other partners for a more diversification. The project would attempt to evaluate the investment that has been proposed by HAPS manufacturing team. The primary question Is on whether the investment required to increase Hap’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 undertaking 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.
Further, the project will also try to evaluate the investment by taking stock of all the personifications in the private labeling market along with a look into the past 10 years worth of growths. It would also review some of the risk free returns that are available in the existing nonrepresentational. The project will also review the process that has been traditionally used by HOP tabulate the various risks by estimating the comma NYSE WAC as a discount rate for capital budgeting projects. Also an NP estimate will be used to calculate the risk
Involved. The present research will also propose certain measures to reduce the risk involved in making investment such as diversification ion of the compacts investment portfolio. This would help enriching the volatility of the company’s investments. Another measure that the project will delve into in detail is asset classes. By combining various assets classes with various levels of risk together In the same portfolio, an Investor Is able to control the exposure to risk for a particular Investment portfolio.
Another measure to address risks while making investments is to proselytism’s the amount of return on the investment using the forecast model In addition, the project will also define certain limitations associated with evaluating the irresponsible In making a big Investment. One of the limitations comes from the fact that the retail partner has agreed to increase Hap’s share for 1 OFF term HOP might not get the returns for their involuntariness they find more partners. Another limitation that would be present while evaluating theories is the act the at the company’s financial position would be at the limit of their comfort zone.
This is a particularly precarious situation that most businesses try to avoid. Hence this limitation’s probably be influencing the decision making process in a negative manner. Furthermore demand for their products could disappear at any time since human behavior and preferences inherently unpredictable. This project will review all the factors that would be involved in evaluating the question as thereto such a big investment for a firm such as HOP is beneficial in the long run
