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Target Case Guidelines

This document provides guidelines for a group case assignment on Target Corporation. Students are to analyze five capital expenditure project proposals from the perspective of the CFO. They must recommend projects totaling $100 million based on criteria like NPV, IRR, sensitivities, size, brand awareness, and corporate objectives. The case aims to teach capital budgeting process, balancing strategy and profitability, and considering both financial and non-financial factors in decisions.

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139 views2 pages

Target Case Guidelines

This document provides guidelines for a group case assignment on Target Corporation. Students are to analyze five capital expenditure project proposals from the perspective of the CFO. They must recommend projects totaling $100 million based on criteria like NPV, IRR, sensitivities, size, brand awareness, and corporate objectives. The case aims to teach capital budgeting process, balancing strategy and profitability, and considering both financial and non-financial factors in decisions.

Uploaded by

dktravels85
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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FIN 6425– Corporate Finance - Nimalendran

Guidelines for the “Target Corporation” Case Assignment

Assignment

This is a group project and the requirements are based on the set your group belongs to.

Grade
Case Presentation = 75 Points {Set 1}
Case Report = 75 Points {Sets 2 & 3}
Peer Review (Online survey) = 50 Points {Set 3}

Guidelines

Please read the following guidelines carefully that are posted with the assignment.
 CASE PRESENTATION
 CASE REPORT
 PEER REVIEW OF CASE PRESENTATION

Target Corporation

In this case, the CFO is considering several capital investment project proposals. Put
yourself as Doug Scovanner who has to make a recommendations based on the five
projects capital expenditure projects (CPR). Each CPR is presented to the Capital
expenditure Committee (CEC) with a dashboard that summarizes the inputs used to
evaluate NPV and IRR and the sensitivities various inputs. The dashboard also has other
information that would be useful in your decision (store type, location, demographics…).
Note that brand awareness and the corporate goal of 100 new stores per year are
important objectives for the firm. The CEC’s objective is to balance corporate strategy
with investment opportunities and profitability.

Learning Objectives
 To understand the capital budgeting process for a large corporation. Each decision
should support the business and financial objectives.
 The capital investment process is important as it determines the value added to
shareholders. Also, these are long term projects and mistakes can be very costly to the
company and shareholders.

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 To review the use of NPV and IRR as decision criteria. Although individual cash
flows are not given for the analysis, the dashboard provides substantial sensitivity
analysis for the value drivers. This afford the opportunity to review the impact on
NPV and IRR.
 To understand the capital budgeting process must consider factors such as brand
awareness, competitors’ strategies, and other objectives in addition to cash flow
analysis.

Please use the following topics/questions as a GUIDELINE ONLY for the


Presentation and the Report
Please see separate guidelines for the report and presentations.
1. Provide a brief synopsis of the case and the decision facing the CFO.
2. Discuss and critique Target’s capital budgeting process. Is it consistent with the
company’s business and financial objectives?
3. What information does the dashboard give you? Is the NPV and IRR sufficient to
make a decision? Explain.
4. Assume that Target can ONLY allocate $100 million for the projects. Based on
this which of the five CPR’s should Doug Scovanner accept? Provide an analysis
and explanation on how you reached the decision. You should consider the
following criteria in your decision.
a. NPV and IRR
b. Sensitivity analysis
c. Why does Target use two discount rates one for the stores (9%) and the
other for the credit cards (4%)?
d. Size/scale of the project
e. Cannibalization of other stores’ sales
f. Store sensitivities
g. Variance to prototype
h. Customer demographics
i. Objective of 100 new stores per year
j. Brand awareness impact
k. Does the CPR require external funds, if so would you recommend issuing
debt or equity?

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