Target Corporation Case

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MGT769 Financial Decisions Target University of Saint Mary Professor Bruce McFarland Target Project Funding Recommendation In the table below is the quantitative summary showing in order, from left to right, what projects are recommended for funding. With the exception of Goldie’s Square, all of the projects are recommended for funding having met Target’s Capital standards for building or remodeling Target Stores. The remainder of this paper is devoted to the analysis supporting the recommendations. | The Barn | Whalen Court | Gopher Place | Stadium Remodel | Goldie’sSquare | NPV | 2(2) | 3(2) | 2(2) | 2(2) | 1(2) = 2 | IRR | 3(2) | 3(2) | 2(2) | 2(2) | 1(2) = 2 | NPV & IRR Sensitivity | 2 | 2 | 1 | 1 | 3 | Market…show more content…
| 20 | 20 | 19 | 19 | 15 | 3 – Best 2 – Average 1 - Worst Case Background The case pertains to Target Corporation and $300 million in capital expenditures it is considering directed at Target’s future store growth and expansion. Five of the ten projects under consideration by Target’s Capital Expenditure Committee (CEC), representing approximately $200 million, will demand the majority of the CEC’s attention when it meets to decide which of the 5 projects are funded. Leading the CEC is Mr. Doug Scovanner, Target’s Chief Financial Officer (CFO), who has had a successful track record leading the CEC in its efforts to choose projects fueling Target’s rapid growth and financial success. CFO Scovanner’s Guidance Mr. Scovanner, in preparation for the CEC meeting, has asked me to prepare a recommendation ranking the 5 projects in order to assist him and the CEC in deciding which projects to accept or reject. Mr. Scovanner provided the following key guidance to assist in ranking the 5 projects for CEC’s meeting. * Project must provide a suitable financial return as measured by it Net Present Value (NPV) and Internal Rate of Return…show more content…
Whalen Court was beat out by the Barn only due to the Barn’s higher IRR. Whalen Court, of all the projects, has the highest NPV of $25, 875. Primarily, for this reason alone, it was chosen as the 2d project in priority for funding. Whalen’s IRR is relatively low at 9.8% however it is still above the 9.0% discount rate. Whalen Court is also entering a relatively affluent area attracting what Target considers its preferred customer. The two negative attributes of Whalen Court are the Capital Investment is greater than the Target prototype store and the store itself is a lease arrangement rather than owned outright by Target. However, Whalen Court’s impressive NPV and the affluent customers it should attract override these

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