Case 19 – Target Corporation

1. Why does Target use different hurdle rates for the store and the credit
cards (9% and 4%, respectively)? What process would you use to
estimate these discount rates to see if they are reasonable?
2. What is Target’s capital-budgeting process? Is it consistent with the
company’s business and financial objectives?
3. Which of the five CPRs did you accept? Which project attributes did you
consider as part of your decision?
4. For each of the respective CPRs, how much would sales need to fall
before NPV equals that of the prototype?
5. How much would sales need to fall in order for the project’s IRR to equal
that of the prototype?
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