This is a Spanish translation of the March 22, 2016, version of UVA-F-1563. Students are in the role of Target Corporation's CFO considering the pros and cons of a variety of capital-investment proposals. The CFO is preparing his thoughts prior to a meeting of the Capital Expenditure Committee (CEC) with other Target senior executives to consider the merits of 10 capital-project requests (CPR), 5 of which are expected to require extra attention. Each CPR has a "dashboard" that summarizes the critical inputs used to compute the net present value (NPV) and internal rate of return (IRR) as well as data about the type of investment (new store or remodel), market size, location, customer-demographic information, as well as the sensitivity of NPV and IRR to changes in various inputs. Students must evaluate the CPRs by balancing corporate-growth objectives with the economics of the projects.
• Understand the capital-budgeting-decision process for a large corporation; each should support the corporation's business and financial objectives. The capital-investment decision is important strategically because of the choice of where to spend the funds. • Review the use of NPV and IRR as decision metrics. Although individual cash flows are not provided for the CPRs, the dashboards give substantial sensitivity analysis for changes in the value drivers of the projects, and therefore afford the opportunity for students to review the principles of NPV and IRR calculations. • Understand the multidimensionality of a capital-investment decision. As a major retailer, Target executives recognized the importance of brand awareness to the success of the company, which makes the NPV only part of the consideration for a capital-project request.