Question 1: How would you describe HPL and its position within the private label personal care industry?
HPL is a major player in private label personal care industry. Private labels hold around 19% (around $4 billion) of personal care industry (around $21.6 billion). HPL holds approximately 28% share of this private label personal care market. Even though HPL is a small player in overall private label market with the revenues of approximately $700 million compared to overall private label market of $70 billion HPL is a major player in private label personal care industry.
Question 2: Using assumptions made by Executive VP of Manufacturing, Robert Gates (Exhibit 5 and table on page 3), estimate the project’s FCFs. Are Gates’ projections …show more content…

| 40,271 | 41,642 | 43,061 | | | Gross Profit | | | | 60,149 | 67,291 | 73,735 | 80,703 | 87,865 | 95,225 | 96,600 | 97,985 | 99,379 | 100,781 | | | SG&A | | | | | 6,594 | 7,286 | 8,004 | 8,747 | 9,517 | 10,314 | 10,520 | 10,730 | 10,945 | 11,164 | | | R&D | | | | | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | | Depreciation | | | | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | | | EBIT | | | | | 49,555 | 56,005 | 61,732 | 67,956 | 74,348 | 80,911 | 82,080 | 83,255 | 84,434 | 85,617 | | | Income Tax @ | 40% | | | 19,822 | 22,402 | 24,693 | 27,182 | 29,739 | 32,365 | 32,832 | 33,302 | 33,773 | 34,247 | | | Unlevered Net Income | | | 29,733 | 33,603 | 37,039 | 40,773 | 44,609 | 48,547 | 49,248 | 49,953 | 50,660 | 51,370 | | | PLUS: Depreciation | | | | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | 4,000 | | | LESS: Capital Expenditures | | 57,817 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | | NWC | | | | 0 | 11,871 | 13,118 | 14,409 | 15,747 | 17,133 | 18,568 | 18,939 | 19,318 | 19,704 | 20,098 | | | LESS: Increases in NWC | | | 11,871 | 1,246 | 1,292 | 1,338 | 1,386 | 1,435 | 371 | 379 | 386 | 394 | | | Free Cash Flow | | | (57,817) | 21,862 | 36,357 | 39,747 | 43,435 | 47,223 | 51,112 |