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Target Corp

In: Business and Management

Submitted By lukas12
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Lukas Stump
905556475
Assignment 8
Asset valuation 4244

Assignment 8

1) The alternative that would be best for the company to choose is the second project. After using the replacement chain because the projects do not have the same life the NPV gave us a clear conclusion. Even though this problem is cost based and not based on revenue you would still take the NPV project that has the lowest NPV or associated cost. Project 2 actually had positive free cash flow for the years that were not a reinvestment or replacement chain year. 2) After analysis of the firm and manufacturing the container I have calculated that the price to be charged for each of the 28000 containers is 42 dollars. This would be the break even point from where the present value of the free cash flows is divided by the number of containers needed sold. Inflation has an effect on the rise in price due to labor and materials. At this price the firm will earn no profit but if they charge a little higher anything over 42 dollars is all profit. ( excel sheet ). Net working capital being reclaimed benefited the price as well.

Problem B

1) This problem for worldwide paper has a lot of relevant cash flows. Net working capital is a huge part of this project totaling 18 million and 16 million in the first year with the last 2 million spread out between 2 years. Revenues increase From 4 million in 2008 to 10 million in 2009 all the way up to 2013. This could be tapping a new market and cost efficiency. Cost of goods sold is also important coming in at 75 percent of revenues and SG&A coming in at 5% of revenues. A 40 percent tax rate and no salvage value for depreciated assets is another relative cash flow.

2) The projects source of value would be the money that it saves in operations and increase its revenues greatly. This project would eliminate the need

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