Net Present Value, Mergers and Acquisitions - 2848 Words

Net present Value, Mergers and acquisitions FIN501 - Strategic Corporate Finance Net present Value, Mergers and acquisitions To start I would like to explain the difference and meaning of the present value of the future cash flows from an investment and the amount of investment. Present value of the expected cash flows is computed by discounting them at the required rate of return. For example, an investment of $1,000 today at 10 percent will yield $1,100 at the end of the year; therefore, the present value of $1,100 at the desired rate of return (10 percent) is $1,000. The amount of investment ($1,000 in this example) is deducted from this figure to arrive at net present value which here is zero ($1,000-$1,000). A zero net†¦show more content†¦So fear was the motivating factor for not agreeing with a merger/acquisition by Google (Carlson, 2010). For their part, Google was excited to acquire Groupon for the ability to tap into the potential for local advertising which they were not capturing through their own marketing efforts. Groupon has a reputation f or establishing and maintaining marketing relationships with their suppliers which is unmatched within the technology sector. Google saw this as a potential for creating a huge revenue source from local advertisers, creating a new advertising source leading to new revenue, while controlling costs for gaining this revenue, resulting in higher levels of performance, which should drive the stock price ever higher. The overall result was that Google decided to go their own way, and established a new offering called GOOGLE OFFERS which is designed to compete directly against Groupon. Thus far it has met with a bit of interest, and has had success to date (Kim, 2013), (Winkler, 2011). The impact on Google shareholders Potential for the Google shareholders was an increase in appreciation of the stock which would have helped to reach the forecast strike price of $1000/share sooner, than later. Moreover, it would have established Google as a continuing growth company, with new acquisitions and new ideas designed to enhance their market positionShow MoreRelatedNet Present Value, Mergers and Acquisitions1406 Words   |  6 Pagesthe shareholders’ wealth. Therefore, merger and acquisition decisions should be consistent with shareholder wealth maximization, and financial characteristics of the targets to consider in the decision-making process. The net present value method is one of the useful methods that help financial managers to maximize shareholders’ wealth. The capital budgeting decision mergers Acquisitions Net Present Value Financial managers are working for theRead MoreNet Present Value of T-Mobiles Discount Rate1421 Words   |  6 PagesPart I: The formula for net present value is as follows: INCLUDEPICTURE http://i.investopedia.com/inv/dictionary/terms/NPV.gif * MERGEFORMATINET   Source: Investopedia (2012) The net present value of this project if T-Mobiles discount rate is 4% is therefore as follows: Year 0 1 2 3 4 5 CF -3219000 350000 939000 1122000 500000 400000 PV -3219000 336538.5 868158.3 997453.9 427402.1 328770.8 NPV -260676 d 4% Based on thisRead MoreRisk Analysis on Investment Decisions1436 Words   |  6 Pagesmeet company needs for making major decisions with data consisting of clear goals, a planned design, high ethics, revealed limitations, adequate analysis, and justified conclusions (Cooper and Schindler, 2003). In this paper, the methods of net present value and internal rate of return are examined based on real-world capital budgeting decisions. This paper also gives insight on valuation techniques used to determine internal and external investment decision strategies and the risk associated withRead MoreNinas Fashions Case Study Essay1424 Words   |  6 Pagesthe Chic Company. 1) Gather information regarding mergers and present it to Nina’s board of directors. 2) Discuss reasons and factors justifying mergers, including their benefits to society and each company. 3) Discuss the Pro’s and Con’s of a hostile versus friendly mergers, along with some data on how shareholders from each side have fared in past mergers. 4) Do a sensitivity analysis of all data that was estimated and used in the merger analysis. 5) How to start negotiations, the beginningRead MorePresent Value1398 Words   |  6 Pagesï » ¿ Net present Value, Mergers and acquisitions Abstract Main objective of undertaking this to report was learn about NPV present value (NPV) method to make capital budgeting decision(Google NEW Project) and success factors involved in mergers and acquisitions(Google-Groupon Case). Answers to the Assignments Part I: Google should go ahead with the new project. Part-II: Google’s acquisition of Groupon would have been win -win situation for both corporations Now I will discuss bothRead MoreThe Current State Of The Health Care Environment1573 Words   |  7 PagesThe current state of the health care environment is extremely competitive, regulated, and expensive. In order for private health care organizations to stay competitive and still be profitable, organizations may have to look at merger and acquisition opportunities. It is important, however not to simply merge for the sake of merging. It is important to look at some of the key financial drivers and assess if would be a good idea financial to merge or acquire with another organization. One key financialRead MoreCapital Structure Approach1558 Words   |  6 Pagesand the EPS as outlined in the schedule below (exhibit 3-1) this is the best alternative to strengthen Competition Bike financial position with strong capital structure while maximizing shareholders value. Although a solid capital structure will maximize a shareholders value and increase the value of the company, it is also important to Competition Bikes as with any other business, is not to lose site and focus on what is also important to the consumer; which is the quality of the product and customerRead MoreKey Factors That Promote M A In Health Care Service.1285 Words   |  6 PagesM A is created by a defensive firm to make another firm more vulnerable. From a theorectical perspective, there are factors that arrive at mergers and acquisition. One major factor is to increase and maximize shareholders wealth and value. However, practitioners of U.S health care system do not follow this theory. So, wh at is driving health care mergers? From my perspective, I think many factors are responsible for takeover. For instance, most independent health care practitioners are strugglingRead MoreStrengths And Weaknesses Of Mci1215 Words   |  5 Pages65% of Fortune 1000 companies. In addition to their expansion, MCI has a low debt to value ratio in comparison to their competitors as well being least leveraged. Whereas their weaknesses lie within their operating losses of over $3,200,000,000 due to a decrease in sales after the WorldCom bankruptcy realignment. As for weaknesses, sales decreased after WorldCom’s bankruptcy. In addition to dissolving the merger with WorldCom, MCI business operation losses at an estimated $3.2 billion were realizedRead MoreStock and Long Term Trend1513 Words   |  7 Pageswholesalers and 15,000 retail outlets. The Robertson products are sold in 137 countries worldwide. This avenue to market Monmouth and Robertson products across resources could le ad to above average growth and profits. 2. Estimate a WACC for the acquisition. Invested Capital | 　 | $37,696,000 | 　 | 　 | 　 | Debt | | $12,000,000 | | | 　 | Equity | | $25,696,000 | | | 　 | 　 | | | | | 　 | Current market price | | $44 | | | 　 | Shares outstanding | | 584,000 | | | 　 |