Target Corporation was founded in 1962 as part of the Dayton Company, marketed as a discount store. Target Corporation became a major retail powerhouse in the United States by the year 2005, and experienced a 12.1 percent sales growth between the years 2000 and 2005. Target Corporation’s plans of growth are to open approximately one hundred stores per year in the United States. The basic theory behind the decision is whether each of the investments benefits exceed the cost after adjusting for the risk and timing of cash flows. In order to reach a decision we will look at each project’s net present value, internal rate of return, as well as other demographic factors. The Barn is a $13 million project to build a new store in a moderately populated area. The original development of this project failed and this is a resubmission of that project. A huge positive of this project is that the prototype NPV can be reached even with sales being 18.1% below the R&P forecast levels. This project requires a relatively small investment for a large rate of return. The investment is also a new opportunity to enter a market they had little presence in. There is little downside to accepting this project, therefore it is the number one project of the five to accept.
Gopher Place is considered an important investment because of expectations for competitor Wal-Mart to expand n the area because of population growth in recent years. Some advantages of this project include that it would be able to achieve a prototype NPV with sales lower than the R&P forecast. This development would take place in an area of increasing population and relatively high median income. One negative aspect of this project is that 19% of sales in this forecast were expected from other Target stores in the area. Overall, we have decided that this investment is favorable and should be the second best