accounting using the photos: Identify and calculate the key metrics that will be used to analyze the decision. This might include proforma financials, NPV, IRR, Payback, ROIC, break-even, and/or other measures.

INTRODUCTION It is early 2014. A leading global skincare manufacturer, Health \& Beauty Co. (HBC), has been losing market share in the hand and body lotion market. While the firm still leads its competitors in market share in this segment of personal care, it seeks to stem further share erosion and, to that end, has recently developed a strategy to recover market share through rebranding, advertising, and repackaging. The situation is especially eritical since a large competitor is believed to be launching a new skincare product in the near future. Your task as senior financial analyst is to draft the capital expenditure proposal related to the new packaging proposal. Information to support you in this task follows. You should complete the firm's capital expenditure template included in Appendix 1. BACKGROUND: The U.S. skincare market has been growing at an average rate of 4% over the past three years and is estimated to reach $11 billion in 2018 . This market includes facial, body, and hair care, as well as other makeup segments. HBC holds a leadership position in the hand and body lotion market but needs to evolve to meet consumers' growing needs and compete with an ever-increasing number of competitors. Recent market research by HBC revealed that consumers perceive the current packaging as outdated: old, generic, dull, and cheap looking. It also lacks a contemporary and premium look compared with some of the main competitor's products, HBC is in the process of rebranding these product lines, and newly developed packaging will play a pivotal role in the plan to rebrand and reposition the product. The new packaging aims to convey the brand image of modem, up-todate, high-quality, everyday use, and good value. Preliminary investigation comparing the existing and proposed packaging revealed the following: 1. The proposed packaging will keep the brand fresh and relevant while maintaining the brand heritage and appeal to existing and future consumers. 2. The project: a. Provides the opportunity to simplify an overcomplicated and confusing pack line-up by reducing the current portfolio of sizes. b. May lead to improved margins since there is the potential to raise prices on the newly packaged items. The current gross margin of the product is 69%. 3. Overall, the new pack design is a cost-effective pack with package unit prices lower than that of the current brand pack. 4. The brand team believes that ineremental sales growth is achievable through the combination of new brand positioning, advertising, and packaging. Feedback from several large retailers consulted on the new packaging was consistently positive. The new packagieg would require the poucture of molds and assembly equipenent (useful life of six years in all) as followx: In addition, the firm will incur start-up expenses related to partial casc teturns and echer itcms. It is assamed that major cuntomen will be alle to mumate donn their inventory levels with the assistance of the trinsitions team. Minimal retarns will come from large retailen including WalMart and Rmart due to their quick inventery tamover. It is anticipated that most returns will come from deug retailes as they shift products to the new packaging and nemowe unold product from the shelves. The redesign calls for cutting SKU's from 79 to 49. No volume loss is anticipated from this since the trutsition team will actively manage shelf space on a customet-by-customer basis to minimine less of shelf presence. The SkU reduction is estimated at $119,000 per year since the new package design is less expensive per unit. The brand's current long-rem strutegic tole is to maintain share and grow at category levels. Sale in the most recent year were $1.30.5 milline. Without the redesign, soles are forecast to remain flat at historic levels. With the icdesign, management believes that sales can grow at the rate of the skincare catepory - forecast at 48 per year for the next five years-and there will also be incremental growth related to recovery of market share of 25 in Vear 1.1% in Year 2,0.5% in Year 3 , and on theteafter. The gross margin will remain at 695 of net sales. The inctemental auaketing and developencat cost is a one-time $700,000 for market research and development. Management thought the project should be cvaluated using a discount rate of 7% based an the firm's weighted average cost of eapital (WACC) and the petceived riskiness of the project. The tax rate is 27%