Stock Analysis on Net
Stock Analysis on Net

Target Corp. (NYSE:TGT)

Capital Asset Pricing Model (CAPM)

Microsoft Excel

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Target Corp. common stock.

Rates of Return

Target Corp., monthly rates of return

Microsoft Excel
Target Corp. (TGT) Standard & Poor’s 500 (S&P 500)
t Date PriceTGT,t1 DividendTGT,t1 RTGT,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2019 $72.64 2,784.49
1. Mar 31, 2019 $80.26 10.49% 2,834.40 1.79%
2. Apr 30, 2019 $77.42 -3.54% 2,945.83 3.93%
3. May 31, 2019 $80.45 $0.64 4.74% 2,752.06 -6.58%
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2024 $135.18 2.17% 5,881.63 -2.50%
71. Jan 31, 2025 $137.91 2.02% 6,040.53 2.70%
Average (R): 1.58% 1.22%
Standard deviation: 9.88% 4.99%
Target Corp. (TGT) Standard & Poor’s 500 (S&P 500)
t Date PriceTGT,t1 DividendTGT,t1 RTGT,t2 PriceS&P 500,t RS&P 500,t3
Feb 28, 2019 $72.64 2,784.49
1. Mar 31, 2019 $80.26 10.49% 2,834.40 1.79%
2. Apr 30, 2019 $77.42 -3.54% 2,945.83 3.93%
3. May 31, 2019 $80.45 $0.64 4.74% 2,752.06 -6.58%
4. Jun 30, 2019 $86.61 7.66% 2,941.76 6.89%
5. Jul 31, 2019 $86.40 -0.24% 2,980.38 1.31%
6. Aug 31, 2019 $107.04 $0.66 24.65% 2,926.46 -1.81%
7. Sep 30, 2019 $106.91 -0.12% 2,976.74 1.72%
8. Oct 31, 2019 $106.91 0.00% 3,037.56 2.04%
9. Nov 30, 2019 $125.01 $0.66 17.55% 3,140.98 3.40%
10. Dec 31, 2019 $128.21 2.56% 3,230.78 2.86%
11. Jan 31, 2020 $110.74 -13.63% 3,225.52 -0.16%
12. Feb 29, 2020 $103.00 $0.66 -6.39% 2,954.22 -8.41%
13. Mar 31, 2020 $92.97 -9.74% 2,584.59 -12.51%
14. Apr 30, 2020 $109.74 18.04% 2,912.43 12.68%
15. May 31, 2020 $122.33 $0.66 12.07% 3,044.31 4.53%
16. Jun 30, 2020 $119.93 -1.96% 3,100.29 1.84%
17. Jul 31, 2020 $125.88 4.96% 3,271.12 5.51%
18. Aug 31, 2020 $151.21 $0.68 20.66% 3,500.31 7.01%
19. Sep 30, 2020 $157.42 4.11% 3,363.00 -3.92%
20. Oct 31, 2020 $152.22 -3.30% 3,269.96 -2.77%
21. Nov 30, 2020 $179.53 $0.68 18.39% 3,621.63 10.75%
22. Dec 31, 2020 $176.53 -1.67% 3,756.07 3.71%
23. Jan 31, 2021 $181.17 2.63% 3,714.24 -1.11%
24. Feb 28, 2021 $183.44 $0.68 1.63% 3,811.15 2.61%
25. Mar 31, 2021 $198.07 7.98% 3,972.89 4.24%
26. Apr 30, 2021 $207.26 4.64% 4,181.17 5.24%
27. May 31, 2021 $226.92 $0.68 9.81% 4,204.11 0.55%
28. Jun 30, 2021 $241.74 6.53% 4,297.50 2.22%
29. Jul 31, 2021 $261.05 7.99% 4,395.26 2.27%
30. Aug 31, 2021 $246.98 $0.90 -5.05% 4,522.68 2.90%
31. Sep 30, 2021 $228.77 -7.37% 4,307.54 -4.76%
32. Oct 31, 2021 $259.62 13.49% 4,605.38 6.91%
33. Nov 30, 2021 $243.84 $0.90 -5.73% 4,567.00 -0.83%
34. Dec 31, 2021 $231.44 -5.09% 4,766.18 4.36%
35. Jan 31, 2022 $220.43 -4.76% 4,515.55 -5.26%
36. Feb 28, 2022 $199.77 $0.90 -8.96% 4,373.94 -3.14%
37. Mar 31, 2022 $212.22 6.23% 4,530.41 3.58%
38. Apr 30, 2022 $228.65 7.74% 4,131.93 -8.80%
39. May 31, 2022 $161.88 $0.90 -28.81% 4,132.15 0.01%
40. Jun 30, 2022 $141.23 -12.76% 3,785.38 -8.39%
41. Jul 31, 2022 $163.38 15.68% 4,130.29 9.11%
42. Aug 31, 2022 $160.34 $1.08 -1.20% 3,955.00 -4.24%
43. Sep 30, 2022 $148.39 -7.45% 3,585.62 -9.34%
44. Oct 31, 2022 $164.25 10.69% 3,871.98 7.99%
45. Nov 30, 2022 $167.07 $1.08 2.37% 4,080.11 5.38%
46. Dec 31, 2022 $149.04 -10.79% 3,839.50 -5.90%
47. Jan 31, 2023 $172.14 15.50% 4,076.60 6.18%
48. Feb 28, 2023 $168.50 $1.08 -1.49% 3,970.15 -2.61%
49. Mar 31, 2023 $165.63 -1.70% 4,109.31 3.51%
50. Apr 30, 2023 $157.75 -4.76% 4,169.48 1.46%
51. May 31, 2023 $130.93 $1.08 -16.32% 4,179.83 0.25%
52. Jun 30, 2023 $131.90 0.74% 4,376.86 4.71%
53. Jul 31, 2023 $136.47 3.46% 4,588.96 4.85%
54. Aug 31, 2023 $126.55 $1.10 -6.46% 4,507.66 -1.77%
55. Sep 30, 2023 $110.57 -12.63% 4,288.05 -4.87%
56. Oct 31, 2023 $110.79 0.20% 4,193.80 -2.20%
57. Nov 30, 2023 $133.81 $1.10 21.77% 4,567.80 8.92%
58. Dec 31, 2023 $142.42 6.43% 4,769.83 4.42%
59. Jan 31, 2024 $139.08 -2.35% 4,845.65 1.59%
60. Feb 29, 2024 $152.92 $1.10 10.74% 5,096.27 5.17%
61. Mar 31, 2024 $177.21 15.88% 5,254.35 3.10%
62. Apr 30, 2024 $160.98 -9.16% 5,035.69 -4.16%
63. May 31, 2024 $156.16 $1.10 -2.31% 5,277.51 4.80%
64. Jun 30, 2024 $148.04 -5.20% 5,460.48 3.47%
65. Jul 31, 2024 $150.41 1.60% 5,522.30 1.13%
66. Aug 31, 2024 $153.62 $1.12 2.88% 5,648.40 2.28%
67. Sep 30, 2024 $155.86 1.46% 5,762.48 2.02%
68. Oct 31, 2024 $150.04 -3.73% 5,705.45 -0.99%
69. Nov 30, 2024 $132.31 $1.12 -11.07% 6,032.38 5.73%
70. Dec 31, 2024 $135.18 2.17% 5,881.63 -2.50%
71. Jan 31, 2025 $137.91 2.02% 6,040.53 2.70%
Average (R): 1.58% 1.22%
Standard deviation: 9.88% 4.99%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of TGT during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t

Variance and Covariance

Target Corp., calculation of variance and covariance of returns

Microsoft Excel
t Date RTGT,t RS&P 500,t (RTGT,t–RTGT)2 (RS&P 500,t–RS&P 500)2 (RTGT,t–RTGT)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2019 10.49% 1.79% 79.33 0.33 5.10
2. Apr 30, 2019 -3.54% 3.93% 26.23 7.35 -13.89
3. May 31, 2019 4.74% -6.58% 9.97 60.81 -24.62
. . . . . . .
. . . . . . .
. . . . . . .
70. Dec 31, 2024 2.17% -2.50% 0.34 13.83 -2.18
71. Jan 31, 2025 2.02% 2.70% 0.19 2.20 0.65
Total (Σ): 6,827.25 1,741.16 1,872.85
t Date RTGT,t RS&P 500,t (RTGT,t–RTGT)2 (RS&P 500,t–RS&P 500)2 (RTGT,t–RTGT)×(RS&P 500,t–RS&P 500)
1. Mar 31, 2019 10.49% 1.79% 79.33 0.33 5.10
2. Apr 30, 2019 -3.54% 3.93% 26.23 7.35 -13.89
3. May 31, 2019 4.74% -6.58% 9.97 60.81 -24.62
4. Jun 30, 2019 7.66% 6.89% 36.89 32.18 34.46
5. Jul 31, 2019 -0.24% 1.31% 3.33 0.01 -0.17
6. Aug 31, 2019 24.65% -1.81% 532.20 9.18 -69.88
7. Sep 30, 2019 -0.12% 1.72% 2.91 0.25 -0.85
8. Oct 31, 2019 0.00% 2.04% 2.51 0.68 -1.30
9. Nov 30, 2019 17.55% 3.40% 254.85 4.77 34.88
10. Dec 31, 2019 2.56% 2.86% 0.95 2.69 1.60
11. Jan 31, 2020 -13.63% -0.16% 231.33 1.91 21.03
12. Feb 29, 2020 -6.39% -8.41% 63.63 92.76 76.82
13. Mar 31, 2020 -9.74% -12.51% 128.17 188.57 155.46
14. Apr 30, 2020 18.04% 12.68% 270.76 131.43 188.64
15. May 31, 2020 12.07% 4.53% 110.05 10.94 34.70
16. Jun 30, 2020 -1.96% 1.84% 12.57 0.38 -2.19
17. Jul 31, 2020 4.96% 5.51% 11.41 18.41 14.49
18. Aug 31, 2020 20.66% 7.01% 364.02 33.48 110.40
19. Sep 30, 2020 4.11% -3.92% 6.37 26.45 -12.98
20. Oct 31, 2020 -3.30% -2.77% 23.88 15.89 19.48
21. Nov 30, 2020 18.39% 10.75% 282.39 90.91 160.22
22. Dec 31, 2020 -1.67% 3.71% 10.59 6.21 -8.11
23. Jan 31, 2021 2.63% -1.11% 1.09 5.45 -2.44
24. Feb 28, 2021 1.63% 2.61% 0.00 1.93 0.06
25. Mar 31, 2021 7.98% 4.24% 40.86 9.14 19.33
26. Apr 30, 2021 4.64% 5.24% 9.34 16.18 12.29
27. May 31, 2021 9.81% 0.55% 67.74 0.45 -5.53
28. Jun 30, 2021 6.53% 2.22% 24.48 1.00 4.95
29. Jul 31, 2021 7.99% 2.27% 41.02 1.11 6.76
30. Aug 31, 2021 -5.05% 2.90% 43.93 2.82 -11.13
31. Sep 30, 2021 -7.37% -4.76% 80.22 35.72 53.53
32. Oct 31, 2021 13.49% 6.91% 141.65 32.43 67.77
33. Nov 30, 2021 -5.73% -0.83% 53.51 4.22 15.02
34. Dec 31, 2021 -5.09% 4.36% 44.47 9.87 -20.95
35. Jan 31, 2022 -4.76% -5.26% 40.20 41.97 41.08
36. Feb 28, 2022 -8.96% -3.14% 111.25 18.98 45.95
37. Mar 31, 2022 6.23% 3.58% 21.61 5.56 10.96
38. Apr 30, 2022 7.74% -8.80% 37.93 100.31 -61.68
39. May 31, 2022 -28.81% 0.01% 923.64 1.48 36.92
40. Jun 30, 2022 -12.76% -8.39% 205.63 92.39 137.83
41. Jul 31, 2022 15.68% 9.11% 198.82 62.28 111.27
42. Aug 31, 2022 -1.20% -4.24% 7.74 29.86 15.21
43. Sep 30, 2022 -7.45% -9.34% 81.65 111.50 95.42
44. Oct 31, 2022 10.69% 7.99% 82.90 45.78 61.61
45. Nov 30, 2022 2.37% 5.38% 0.63 17.27 3.29
46. Dec 31, 2022 -10.79% -5.90% 153.15 50.65 88.08
47. Jan 31, 2023 15.50% 6.18% 193.65 24.55 68.96
48. Feb 28, 2023 -1.49% -2.61% 9.43 14.68 11.76
49. Mar 31, 2023 -1.70% 3.51% 10.80 5.22 -7.51
50. Apr 30, 2023 -4.76% 1.46% 40.21 0.06 -1.55
51. May 31, 2023 -16.32% 0.25% 320.42 0.94 17.40
52. Jun 30, 2023 0.74% 4.71% 0.71 12.21 -2.94
53. Jul 31, 2023 3.46% 4.85% 3.54 13.15 6.82
54. Aug 31, 2023 -6.46% -1.77% 64.74 8.95 24.07
55. Sep 30, 2023 -12.63% -4.87% 201.94 37.11 86.57
56. Oct 31, 2023 0.20% -2.20% 1.92 11.68 4.73
57. Nov 30, 2023 21.77% 8.92% 407.54 59.26 155.40
58. Dec 31, 2023 6.43% 4.42% 23.53 10.26 15.54
59. Jan 31, 2024 -2.35% 1.59% 15.43 0.14 -1.45
60. Feb 29, 2024 10.74% 5.17% 83.88 15.62 36.20
61. Mar 31, 2024 15.88% 3.10% 204.51 3.54 26.91
62. Apr 30, 2024 -9.16% -4.16% 115.39 28.96 57.81
63. May 31, 2024 -2.31% 4.80% 15.16 12.83 -13.95
64. Jun 30, 2024 -5.20% 3.47% 46.01 5.05 -15.24
65. Jul 31, 2024 1.60% 1.13% 0.00 0.01 0.00
66. Aug 31, 2024 2.88% 2.28% 1.68 1.13 1.38
67. Sep 30, 2024 1.46% 2.02% 0.02 0.64 -0.10
68. Oct 31, 2024 -3.73% -0.99% 28.27 4.88 11.75
69. Nov 30, 2024 -11.07% 5.73% 160.12 20.34 -57.07
70. Dec 31, 2024 2.17% -2.50% 0.34 13.83 -2.18
71. Jan 31, 2025 2.02% 2.70% 0.19 2.20 0.65
Total (Σ): 6,827.25 1,741.16 1,872.85

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VarianceTGT = Σ(RTGT,t–RTGT)2 ÷ (71 – 1)
= 6,827.25 ÷ (71 – 1)
= 97.53

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (71 – 1)
= 1,741.16 ÷ (71 – 1)
= 24.87

CovarianceTGT, S&P 500 = Σ(RTGT,t–RTGT)×(RS&P 500,t–RS&P 500) ÷ (71 – 1)
= 1,872.85 ÷ (71 – 1)
= 26.75

Systematic Risk (β) Estimation

Microsoft Excel
VarianceTGT 97.53
VarianceS&P 500 24.87
CovarianceTGT, S&P 500 26.75
Correlation coefficientTGT, S&P 5001 0.54
βTGT2 1.08
αTGT3 0.27%

Calculations

1 Correlation coefficientTGT, S&P 500
= CovarianceTGT, S&P 500 ÷ (Standard deviationTGT × Standard deviationS&P 500)
= 26.75 ÷ (9.88% × 4.99%)
= 0.54

2 βTGT
= CovarianceTGT, S&P 500 ÷ VarianceS&P 500
= 26.75 ÷ 24.87
= 1.08

3 αTGT
= AverageTGT – βTGT × AverageS&P 500
= 1.58% – 1.08 × 1.22%
= 0.27%

Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.64%
Expected rate of return on market portfolio2 E(RM) 14.89%
Systematic risk (β) of Target Corp. common stock βTGT 1.08
 
Expected rate of return on Target Corp. common stock3 E(RTGT) 15.67%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(RTGT) = RF + βTGT [E(RM) – RF]
= 4.64% + 1.08 [14.89% – 4.64%]
= 15.67%