Target Corp Case Analysis

1810 WordsMar 15, 20118 Pages
| Target Corporation | Memo To: Dr. Brian Boscaljon From: Adam Leone and Jean Costa CC: Doug Scovanner, CFO Date: [ 2/14/2011 ] Re: November Meeting Capital Budgeting Decisions The Objective As the November Meeting approaches, CFO Doug Scovanner is faced with the problem of choosing which of the five controversial projects available to accept. Our task is to assume this role and evaluate each of the projects based upon two major criteria. The first is determining the firm’s financial motives by quantifying the projected value added to the firm and the risk associated with each project. When determining to accept or reject projects based upon adding value, the most helpful instruments we have are Net Present Value (NPV) and the…show more content…
This directly impacts the projected NPV of the project as almost 95% of the cash flows are derived from this boost in sales. In addition to the financial support, remodeling the Stadium location also fits well with their business strategy. Some of the key supporting evidence includes a high percentage of the target market in the trade area at 42% of college educated adults, and a population with the highest median income of the group at $65,931. Most important to Target however, would be the maintenance of their brand. As a company that places a high value on the image of their brand, revitalizing a lagging store would both keep their presence in the local area and potentially draw more customers to an upgraded location. The final decision would be to accept the project under no budget constraints, but not issue new debt or equity to achieve it. Whalen Court – Ranked 2nd The obvious concern regarding the Whalen Court project is the large initial investment required to get it off the ground. Of this cost, the most pressing financial concern is the requirement of leasing the building as opposed to building and owning its own store. As a result, our measures of profitability are not as attractive due to the high costs of doing business in an urban environment. This is reflected in how it measures up to the prototype Target store. Although the sales generated absolutely crush the prototype sales, the total net investment exceeds that of the prototype by $90

More about Target Corp Case Analysis

Open Document