Essay about Target's Financial Evaluation

1302 Words Jan 27th, 2013 6 Pages
Juan A. Torres Rodriguez
D01596038

Mini Case Assignment

Target Corp. started in 1902 as Dayton’s Dry Goods company. At 1911, Dayton’s Dry Goods is renames as Dayton Company, and commonly known as Dayton’s Department Store. In 1946 Dayton’s Department Stores started giving the community back 5% of their pretax profits, a practice that Target Corp still maintains. During the 1960’s Dayton’s create a new kind of store to appeal the masses called Target, opening the first Target store in the Twin Cities on May 1, 1962. The industry sector in which Target Corporation competes is in the retail sector reaching the $62.87 Billion in sales.
As mentioned above, Target competes in the retail sector, which makes the operating risks of
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Overall, Target is improving significantly their debt to capitalization ratio, but still has some work to do.
In regards of Target stock, currently they don’t have any preferred stock outstanding, just common stock. Target’s common stock is traded in the NYSE as TGT. The price of it’s common stock as of today is $62.50, going up 0.06 points. Target’s cash dividend yield on the Common Stock is 0.0192 = 1.92% = 2.0:
Cash dividends declared per share: $1.20
Current stock price: $62.50
Cash dividend yield= 1.15 dividends declared/ 62.50 stock price = 1.92 = 2.0
Target’s market capitalization is:
668.4 million shares issued and outstanding x $62.50 of stock prices = 41.8 Billion

Continuing with Target’s capital structure, if we look at Target’s liabilities section:
Short portion of Long-Term Debt = $3.3 Billion
Long-term debt = $15.2 Billion
Therefore the total debt for Target would be:
3.3 B + 15.2 B = 18. 5 Billion Dollars
Taking the previous calculation of Targets market capitalization of 41.8 the total capitalization would be:
18.5 B + 41.8 B = 60.3 Billion, or:
31% Debt
69% Equity
As of November 18, 2012, Target’s current beta is .48. Now if we would like to calculate what would be Target’s new beta without the long-term debt (unlevered beta) we need to use the Hamada formula for the unlevered beta
bu= b/ [1 +(1-T)(D/S)
bu= .48 / [ 1 + (1-34.3%) (18.5/40.6)]
bu= .37
If Target…

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