- As a recent MBA graduate, you have been hired as a financial analyst by a private equity firm. Your firm is investigating the possibility of acquiring Target Corporation (TGT) i.e. your firm and Target’s management will purchase all of the shares.
Your assignment is to address the issues found below. The decision makers determine a price per share for the stock in part based on the information that you provide. (You will not actually determine a price.) For the computations, use the information found on the Yahoo! Finance web pages, Guruficus.com, or Morningstar.com. The numbers used would be for the financials of February 3, 2018 and January 28, 2017. Other computations and issues, which require information that is more current, is found on these webpages.
For discussion questions, a good source of information is found in the 2017 Annual Report, as well as recent articles concerning TGT. The link to the company’s official web site can be found in the Profile page on Yahoo! Finance. Your grade for the qualitative answers depends on the quality and quantity of relevant information, as well as the quality of writing.
(12 pts) a) Discuss TGT in the context of the forces considered in performing an environmental scan.
(6 pts) b) Discuss for TGT the risks that the company needs to consider in conducting its operations.
(4 pts) c) Indicate the Beneisch M-Score and Piotroski F-Score for TGT. Explain the significance of both financial metrics.
(3 pts) d) For TGT explain whether you believe if it can take on more debt. Use computations to support your conclusion.
(3 pts) e) Discuss the inventory position of TGT.
(6 pts) f) Construct the DuPont Identity for TGT. Explain your results.
(3 pts) g) Determine the MVA for TGT and discuss the results.
(4 pts) h) Determine the EVA for TGT and discuss the results. Assume that TGT’s cost of capital is 7 percent. Use a tax rate of 20 percent for TGT. Discuss the results.
(5 pts) i) Determine the free cash flow for 2017 (year ending 2/3/18) for TGT.
Comment on the results.
(3 pts) j) Determine and discuss the PE ratio for TGT.
(6 pts) k) Discuss the overall financial health of TGT.
(3 pts) l) After the final price for TGT is determined, do you believe
that this is evidence of an efficient or inefficient market? Explain
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