On November $14,2006,$ Doug Scovanner, CFO of Target Corporation, was preparing for the November meeting of the Capital Expenditure Committee $($CEC$).$ Scovanner was one of five executive officers who were members of the CEC $($Exhibit $1).$ On tap for the $8$:$00$ a$.$m$.$ meeting the next morning were $10$ projects representing nearly $$300$ million in capital$-$expenditure requests. With the fiscal year's end approaching in January, there was a need to determine which projects best fit Target's future store growth and capital$-$expenditure plans, with the knowledge that those plans would be shared early in $2007,$ with both the board and investment community. In reviewing the $10$ projects coming before the committee, it was clear to Scovanner that five of the projects, representing about $$200$ million in requested capital, would demand the greater part of the committee's attention and discussion time during the meeting.

The CEC was keenly aware that Target had been a strong performing company in part because of its successful investment decisions and continued growth. Moreover, Target management was committed to continuing the company's growth strategy of opening approximately $100$ new stores a year. Each investment decision would have long$-$term implications for Target: an underperforming store would be a drag on earnings and difficult to turn around without significant investments of time and money, whereas a top$-$performing store would add value both financially and strategically for years to come.

Retail Industry

The retail industry included a myriad of different companies offering similar product lines $($Exhibit $2).$

For example, Sears and JCPenney had extensive networks of stores that offered a broad line of products, many of which were similar to Target's product lines. Because each retailer had a different strategy and a different customer base, truly comparable stores were difficult to identify. Many investment analysts, however, focused on Wal$-$Mart and Costco as important competitors for Target, although for different reasons. Wal$-$Mart operated store formats similar to Target, and most Target stores operated in trade areas where one or more Wal$-$Mart stores were located. Wal$-$Mart and Target also carried merchandising assortments, which overlapped on many of the same items in such areas as food, commodities, electronics, toys, and sporting goods.

Costco, on the other hand, attracted a customer base that overlapped closely with Target's core customers, but there was less often overlap between Costco and Target with respect to trade area and merchandising assortment. Costco also differed from Target in that it used a membership$-$fee format.$\text{'}$ Most of the sales of these companies were in the broad categories of general merchandise and food. General