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Target Case

In: Business and Management

Submitted By hong206
Words 561
Pages 3
| 2013 | | |

Target case write-up | FNCE601 CASE WRITE-UP 02 |

Capital Expenditure Committee (CEC) plays a critical role in determining the projects that best fit Target’s future store growth and capital-expenditure plans. However, if the projects larger than $50 million it’s the board of directors’ responsibility to approve the project. On the one hand, the process rigorously follows Target’s strategic goal. The committee not only considers a positive NPV but also the potential of the project, the scale of the project and the effect of the project for the future. In this regard, we believe the process is considerate and well-balanced. On the other hand, when deciding to open a new store, the CEC heavily rely on P04 as a prototype, which may have missed some information with regard to location, and geographic distribution.
A real-estate manager is responsible for the proposal from the beginning to the end of setting up a new store. His or her insightful knowledge and capability play an important role in choosing, reviewing and presenting the projects before getting approved or rejected by the CEC. However, real-estate managers’ emotional involvement in the proposal may make them not as objective as possible with their projects. In this regard, we would suggest Target to hire more than one real-estate manager to balance their work.
Conventionally, a high, positive NPV and a high IRR are important determinants to choose a project. In terms of 5 CPRs in Target CEC situation, we believe Doug Scovanner should also consider “area demographics”, “population growth” and “affluent communities”. As a result, we suggest Scovanner to accept Gopher Place, Whalen Court, The Barn and Stadium Remodel. Firstly, Gopher, The Barn and Stadium all have a high IRR (12.3%,16.4% and 10.8%) and high, positive NPV (>$10 million), which indicates those projects will be…...

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