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Discuss How It Might Influence Mr. Hansson To Make The Decision

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STRATHMORE UNIVERSITY
MANAGERIAL FINANCE ASSIGNMENT

STUDENT NAME: LINDA MCGAW
ADMISSION NO: 061902

SUBMITTED TO:
SUBMITTED BY: 28TH JUNE 2016

CASE; HANSSON PRIVATE LABEL, INC
EVALUATING AN INVESTMENT IN EXPAANSION

Identify the main dilemma and the key questions Mr. Hansson needs to respond to. Analyze in detail information in relation to the following and discuss how it might influence Mr. Hansson to make the decision (without any calculations)

The main dilemma Mr. Hansson is facing is whether to invest in the proposed $50 million expansion project proposed by his manufacturing team and how to finance it, should be financed through equity or through additional debt.
Just to provide a detailed analysis that …show more content…

At this point with 90% capacity in operations, an expansion project seems lucrative on face value, however further analysis needs to be conducted, especially since it entails accommodating one of the most powerful retailers in the next 3 years. This will expand its customer base, provide opportunities to grow regionally and abroad and might change the competitive landscape. HPL’s competitors will definitely shy away from investing or expanding in the personal care product when they make the announcement of the multiyear contract with a powerful customer. This will give HPL a competitive edge in the industry and have the biggest market share by …show more content…

It forms part of the capital structure of the Company. It affects the firm’s capital structure, Interest rates, risks and the market’s overall attitude towards risk. The capital structure are sources of financing for business projects which can either be in form of debt or equity. Most small companies will opt for short term debt as opposed to large companies which might opt for securities such as bonds to raise the initial capital. Debt is always preferred to equity because of tax shield benefit of debt among other benefits. However other big companies combine both equity and debt in its capital

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