Target Corp. Weighted Average Cost of Capital

2230 words 9 pages
The purpose of this memo is to provide Target Corp. senior management with an evaluation of the company’s weighted average cost of capital (WACC). Since the 2010 financial information is not yet to be finalized, the analysis will use the most currently published financial data to evaluate each component of the WACC, including the company financial structure, cost of debt, and cost of equity. I. Target Corp. Financial Structure
According to the consolidated balance sheet on January 30, 2010 (exhibit 1), the total amount of debt, including short-term and long-term debts and other current liabilities was at $16.814 billion. Account Payable is excluded from the WACC’s debt component because it is not a source of funding that comes from
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Since this analysis is built upon some assumptions and historical data, it will provide only a close estimate of the opportunity cost. Nevertheless, it should help assess the company’s overall level of risk and serve as a useful tool to value potential long-term investments in the future.

Exhibit 1: Consolidated Annual Balance Sheets for the Fiscal year ending in January View: Annual Data | Quarterly Data | All numbers in thousands |

Period Ending | Jan 30, 2010 | Jan 31, 2009 | Feb 2, 2008 | | Assets | Current Assets | | Cash And Cash Equivalents | 2,200,000 | 864,000 | 2,450,000 | | Short Term Investments | - | - | - | | Net Receivables | 6,966,000 | 8,084,000 | 9,207,000 | | Inventory | 7,179,000 | 6,705,000 | 6,780,000 | | Other Current Assets | 2,079,000 | 1,835,000 | 469,000 | | Total Current Assets | 18,424,000 | 17,488,000 | 18,906,000 | Long Term Investments | - | 163,000 | 215,000 | Property Plant and Equipment | 25,280,000 | 25,756,000 | 24,095,000 | Goodwill | - | 60,000 | 208,000 | Intangible Assets | - | 171,000 | - | Accumulated Amortization | - | - | - | Other Assets | 829,000 | 862,000 | 1,136,000 | Deferred Long Term Asset Charges | - | - | - | | Total Assets | 44,533,000 | 44,106,000 |

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