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FIN 601 – Corporate Financial Management
Target Corporation Case Study Analysis
October 26, 2012
Executive Summary
This case is centered on Target Corporation and a November, 2006 meeting. At the meeting,
the CEC will review summary information for ten capital investments and determine which ones
to pursue. Target’s Chief Financial Officer requires a rank ordering of five of the ten projects.
Our team recommends the following rank order:
1. The Barn
2. Gopher
3. Whalen
4. Stadium Remodel
NOTE: This ranking was based on the prototype NPV being achieved and the relationship
between sales and the R&P forecast levels.
In a focused comparison of Whalen Court and Goldie’s Square, we recommend that Whalen
Court be pursued. Goldie’s Square should not be pursued. It has a much lower Total Net
Present Value (NPV), a negative Store NPV and the required sales are 45.1% above the R&P
forecast level.
Background and Detailed Analysis
Target had steadily increased shareholder value by following a strategy of opening 100 stores a
year and creating strong brand awareness. By 2006, Target competed successfully with Wal‐
Mart and other similar retailers with net revenue of $53 billon, a solid debt rating (A+), and a
readiness to invest as much as $3.5 billion again in store growth to propel future sales.
Doug Scovanner, Target’s Chief Financial Officer, expected five of the ten Capital Request
Projects (CRP) coming before the Capital Executive Committee (CEC) to require careful review.
These five projects and costs are listed in Table 1.
Table 1. Five Projects and Their Costs
Project
Cost
Gopher
$23 million
Whalen
$119.3 million
1
The Barn
$13 million
Goldie’s Square
$23.9 million
The Stadium (remodel)
$17 million
For each project, managers prepare “Dashboard” summaries of the construction costs, land ...