Precision Consulting FirmPrepared for Dr. Rivetti

Advanced Corporate Finance (404)

April 1, 2016

Consultant: Kevin Williams

Doug Scovanner needs the Precision Consulting

Firm to rank the following projects so he can give

the best recommendation for the Capital

Expenditure Committee (CEC).

Chief Financial Officer ProfileDoug Scovanner

(1st) The Barn (4th) Stadium (Remodel)

(2nd) Whalen Court (5th) Gopher Place

(3rd) Goldie’s Square

§ Location Assessment Formula

§ Each grade earns a score out of 5, working on a letter grading system. Each subsection is given a weight to complete a weighted average calculation.

A = 5 C = 3 F = 1B = 4 D = 2

Example§ Company Alpha

§ Investment: 4 (.15)§ NPV: 4 (.20)§ Sales Decline: 3 (.05)§ IRR: 3 (.075)§ Population: 5 (.20)§ Population Increase: 1 (.075)§ Median Income: 2 (.10)§ % of College Adults: 5 (.15)

§ Total Grade Points (GP) = 27 (GP1*W1)+(GP2*W2)… (GP8*W8)= 3.800)§ Weighted Points (W) = 100%

§ WEIGHTED GRADE: 3.80

INTELLECTUAL PROPERTY

OF PRECISION CONSULTING FIRM. ©

* Weighting each subsection differently is done for more precise results yet the filter for each subsection is purely subjective.

Investment OpportunitiesRequiring CEC Review

§ Gopher Place § Goldie’s Square § The Barn§ Stadium (Remodel)

§ Requires Board Approval

§ Whalen Court

The five projects available to pitch to the Capital Expenditures Committee.

CEC meets monthly to review all project requests in excess of $100,000.

Projects require board approval for all projects larger than $50,000,000.

Projects that have a negative NPV will be considered by the strategic importance to the company.

Tomothy R. Baer

Michael Francis

John Griffith (CEC)

Jodeen Kozlak

Troy Risch (CEC)

Janet Schalk

Douglas Scovanner (CEC)

Terrence Scully

Gregg Steinhafel (CEC)

Robert Ulrich (CEC)

§ Target Format§ Estimated 134,000 Square Feet.

§ 1,500 Square Feet “PFresh” Layout.

§ Super Target Format§ 239 Locations Presently§ Estimated 174,000 Square Feet.

§ “PFresh” Larger Layout.

§ Flexible Target Format (Express)§ Estimated 80,000 Square Feet.

§ Downtown City Layout§ Customers utilizing public transportation.

§ Logo § Bulls-eye and Dog with the Target Logo.§ Studies support that the Target Brand is more

of a recognizable brand than Nike and their logo, the “Swoosh.”

§ Demographic§ Upper Middle Class§ Female

§ With Children.§ 4 Year Degree

§ The Dayton Company§ Opened first store in 1962.§ Changed name to “The Target

Corporation.Ӥ Opened first Target Super Store in 1995.

§ Website§ Launched Target.com in 1999.

Wal-Mart Stores Inc.

§ Major Difference § Customer Base

§ Referring to customers as Guests.

§ Major Similarity§ Product Lines and Services

Costco Wholesale Corp.

§ Major Difference§ Product Lines

§ Major Simularities§ Customer Base

§ Membership Fees § 2% of Total Revenue.

§ 72.8% of Operating Income.

§ Like Target’s Red Card § Comprise a secondary stream of revenue.

67%

11%

11%

11%

22%

REVENUE (BILLIONS)

Wa-Mart

Costco

Target

Sears

WAL-MART: 315.7 BILLION

COSTCO: 52.9 BILLION

SEARS: 49.1 BILLION

TARGET: 52.6 BILLION

Wal-Mart’sInternational Presence

• UNITED KINGDOM• CENTRAL AMERICA• SOUTH AMERICA• MEXICO• JAPAN• PUERTO RICO

Initial Investment: $13,000,000.00 [Lowest]

§ Positive § Even if Sales drop 18% below forecast,

Target will still achieve it’s ROI.§ Store represents a new market with the

nearest Target is located 90 miles away.§ Building: Ownership

§ Negative§ Competitor Wal-Mart planning on

coming in.§ Store located in rural area.

Metrics

§ WEIGHTED GRADE: A (3.92)

§ NPV: $20,500,000

§ Sales Decline: ($4,066,000) [Lowest]

§ IRR: 16.4% [Highest]

§ Population: 151,000§ Increase: 3%

§ Median Income: $38,200/Year [Lowest]

§ % Adults/College: 17% [Lowest]

Initial Investment: $119,300,000.00 [Highest]

§ Positive§ Rare opportunity for Target to enter the

“Urban Setting,” of a metropolitan area.

§ Negative

§ Building: Leased§ If not approved by November meeting, space

could be filled by other retailer.

§ Requires board approval since initial investment is > $50,000,000.

Metrics

§ WEIGHTED GRADE: B (3.39)

§ NPV: $25,900,000 [Highest]

§ Sales Decline: ($16,611,000) [Highest]

§ IRR: 9.8%

§ Population: 632,000 [Highest]§ Increase: 3%

§ Median Income: $48,500/Year

§ % Adults/College: 45% [Highest]

Initial Investment: $23,900,000.00

§ Positive§ Carries an affluent and fast growing

population.

§ Building: Ownership

§ Key Strategic Area, Target already owns 12 stores in the area.

§ Negative§ Goldie’s Square requires a 45.1%

increase in Sales than what is forecasted to achieve stated NPV.§ NVP is also lowest of all projects.

Metrics

§ WEIGHTED GRADE: C (3.24)

§ NPV: $300,000 [Lowest]

§ Sales Decline: ($4,073,000)

§ IRR: 8.1%

§ Population: 222,000§ Increase: 16%

§ Median Income: $56,000/Year

§ % Adults/College: 24%

Initial Investment: $17,000,000.00

§ Positive§ Has the highest Median Income.§ Building: Ownership

§ Negative§ No population/Population Increase

data available.

Metrics

§ WEIGHTED GRADE: D (3.16)

§ NPV: $15,700,000

§ Sales Decline: ($7,854,000)

§ IRR: 10.8%

§ Population: No Information§ Increase: No Information

§ Median Income: $65,931/Year [Highest]

§ % Adults/College: 42%

Initial Investment: $23,000,000.00

§ Positive§ Even if Sales drop 5.3% below forecast,

Target will still achieve it’s ROI.

§ Building: Ownership

§ Negative§ Wal-Mart is planning to add 2

Supercenters in response to anticipated population growth.

Metrics

§ WEIGHTED GRADE: F (3.13) [Lowest]

§ NPV: $16,800,000.00

§ Sales Decline: ($4,722,000)

§ IRR: 12.3%

§ Population: 70,000§ Increase: 27%

§ Median Income: $56,400/Year

§ % Adults/College: 12% (Lowest)

Precision Consulting FirmConsultant: Kevin Williams