Questions for the Target Corporation Case:

1. (15%) Did the capital budgeting process support Target Corporation’s strategy? Describe briefly how it does or
doesn’t.

2. (15%) Target corporation uses two different discount rates in the same case. Does this seem appropriate?

3. (15%) In the Goldie’s Square proposal, the NPV of the store is negative. Should this proposal be accepted or
rejected? Why or why not?

4. (15%) Did Target Corporation’s capital budgeting process incorporate real options in their NPV evaluations (such as
the option to expand)? What do you think of their practice?

5. (20%) Assume Target Corporation has unlimited funds. Which of the five projects (Gopher Place, Whalen Court, The
Barn, Goldie’s Square, & Stadium Remodel) do you approve? (Remember: you are a finance nerd, you work in TPN).

6. (20%) Now assume that the Target Corporation is only willing to spend $220M in this month’s CEC. $100M of the
$220M is presumed to be utilized by the top 5 projects leaving only $120M for the remaining 5 projects (Gopher
Place, Whalen Court, The Barn, Goldie’s Square, & Stadium Remodel). Under this case of capital rationing, what tool
could you use to prioritize the projects and which ones would you choose? What is the combined NPV of your
selected projects?
Guidance for case write-ups
• Your case write-up should be in text format. You should respond to all
questions specifically and directly. Do not simply write a question number
and an answer (for example do NOT write #1. YES). You can include the
number for reference, but write out in sentence format your response (for
example, you could write #4. My analysis concludes that the company
should not make the investment and it should pay a shareholder dividend.
This is demonstrated…)
• The written text of your responses should be no more than 2 pages.
• You should attach and reference exhibits showing ratios, calculations, cash
flow and NPV calculations, etc. There is no specific limit to the number of
attachments you can include in your case writeup submission.
• Case writeups are to be submitted as a single (combined) document that is
either a MS Word document or a PDF file.