Case 19 - Target Corporation analysis 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? Target uses different hurdle rate for the store and the credit cards because they want to make as much revenue as possible. With the low credit card rate Target is able to get a lot of people to sign up for the credit card because the interest rates are extremely low. Since Target has such a low credit card rate they raise the store interest rate to make up for the difference. I would use the IRR, NPV, or the discount payback method to estimate these rates. 2. What is Target's capital-budgeting process? Is it consistent with the company's business and...
Excerpt from file: Case19TargetCorporationanalysis 1.WhydoesTargetusedifferenthurdleratesforthestoreandthecredit cards (9% and 4%, respectively)? What process would you use to estimatethesediscountratestoseeiftheyarereasonable? Target uses different hurdle rate for the store and the credit cards
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