Facility Sustainment and Firm Value: A Case Study Based on Target Corporation

Abstract

This paper argues that increasing the level of facility sustainment(maintenance and repair) funding can increase firm value. Higher levelsof facility sustainment funding reduce the list of maintenance and repairprojects and maintain the liquidation value of the firm's facilities. Acondition is derived that establishes the minimum probability offinancial distress required for firm value to increase as sustainmentfunding increases. This condition is tested with a case study based onthe annual reports of a major retailer, Target Corporation. The resultssupport the hypothesis. This holds even though adverse externalities thatmight occur from underfunding sustainment have not been considered.