Net Present Value, Mergers and Acquisitions - 1406 Words

Abstract One financial goal of financial managers is to maximize the 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 the shareholders and their primary goal is profit maximization in order to maximize the wealth of the company and the shareholders. The Capital budgeting decision focuses on the†¦show more content†¦Online acquisitions didn t get any bigger than this† (Sennett, 2012). The impact on Google shareholders would be a negative impact on their stock. For example, â€Å"there is also a perception in the market that Google would not acquire Groupon as it will have a negative impact on Google s stock. This might be true for the shorter-term but not for the longer-term period as Groupon grows and delivers better performance† (Seeking Alpha, 2012). In addition, if Google was to acquire Groupon then Google will face tax losses. The impact on Groupon shareholders would add value to the company because Google would back it and the company could come up with more innovative ways to keep and attract new customers. The business concept for Gro upon could lead to duplications by other businesses. Groupon stock would increase and the company could have made millions of dollars off a merger with Google, since Google is already a profitable company. The financial conditions of both corporations prior to the merger were outstanding. For example, Groupon had an annual revenue of more than $500 million and the company was estimated at $1.4 billion. On the other hand, Google was already a successful company with shares of over $600. â€Å"Google Investors, however, seemed focused on Groupon’s valuation, which was estimated at 1.4 billion during its last fund-raising round in April. Shares in Google fell 4.5 percent, to $555.71; the stock was battered by newsShow MoreRelatedNet Present Value, Mergers and Acquisitions2848 Words   |  12 PagesNet 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; thereforeRead 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 | | | 　 |