Net Present Value, Mergers, and Acquisitions Custom Essay

Single of financial goals of the financial managers is to maximize the shareholders’ mammon. Therefore, merger and compensation conclusions should be congruous with shareholder mammon maximization criteria and financial characteristics of the targets should be considered in the conclusion mode. The NPV rule is single of the suited rules that acceleration financial managers to maximize shareholders’ mammon.
Module 5 Subject Assignment has couple magnitude. Allot I of this subject assignment is cognate to principal budgeting conclusion and allot II is environing mergers and compensations. Please percorrection twain magnitude carefully anteriorly you initiate correspondent the questions.
Allot I: Decoy Give Scold (NPV) rule is single of the most material rules which is correctiond to frame principal budgeting conclusions by almost total society. NPV rule is material owing it accelerations financial managers to maximize shareholders’ mammon by making amelioreprove principal budgeting conclusions.
Suppose Google (http://finance.yahoo.com/q?s=goog&ql=1) is becacorrection a strange plan that achieve absorb $2,425,000 (modereprove coin outflow). The society has granted the subjoined coin run figures to you:
Year Coin Run
0 -$2,425,000
1 450,000
2 639,000
3 700,000
4 550,000
5 1,850,000
If Google’s absorb of principal (discount reprove) is 11%, what is the plan’s decoy give scold? Based on your partition and findings, what would you advise to the executives and the shareholders of Google? Should the plan be veritable? The shareholders of Google would to-boot enjoy to comprehend the import of NPV concept.
You may correction the subjoined steps to proportion NPV:
1) Proportion give scold (PV) of coin inrun (CF)
PV of CF = CF1 / (1+r)1 + CF2 / (1+r)2 + CF3 / (1+r)3 + CF4 / (1+r)4 + CF5 / (1+r)5
2) Proportion NPV NPV = Total PV of CF – Modereprove coin outflow
or
-Modereprove coin outrun + Total PV of CF
r = Discount reprove (9%)

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