Net present value, mergers & acquisitions

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I have attached part I and II of this FINAL. Please show all work for this assignment. My professor asked for detailed info on why & why not (computations that lead to decision) Document Preview: Part I: Net Present Value (NPV) method is one of the most important methods which is used to make capital budgeting decisions by almost every company. NPV method is important because it helps financial managers to maximize shareholders’ wealth by making better capital budgeting decisions. Suppose Google ( http://finance.yahoo.com/q?s=goog&ql=1http://finance.yahoo.com/q?s=goog&ql=1) is considering a new project that will cost $2,425,000 (initial cash outflow). The company has provided the following cash flow figures to you: Year Cash Flow 0 -$2,425,000 1 450,000 2 639,000 3 700,000 4 550,000 5 1,850,000 If Google's cost of capital (discount rate) is 11%, what is the project's net present value? Based on your analysis and findings, what would you recommend to the executives and the shareholders of Google? Should the project be accepted? The shareholders of Google would also like to know the meaning of NPV concept. You may use the following steps to calculate NPV: 1) Calculate present value (PV) of cash inflow (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) Calculate NPV NPV = Total PV of CF – Initial cash outflow or -Initial cash outflow + Total PV of CF r = Discount rate (9%) If you do not know how to use calculator, please use the present value tables. Part II Rumors about potential mergers and acquisitions are often a hot topic in the business press. There are rumors that Google is considering acquiring Groupon ( http://finance.yahoo.com/q?s=GRPN&ql=0http://finance.yahoo.com/q?s=GRPN&ql=0). As you know from reading the material in the background materials, mergers and acquisitions can potentially bring about great rewards but also can potentially bring great risks and pitfalls. For this assignment, do some research concerning the arguments both for and against such an acquisition from a financial perspective. For this module we are not so concerned with how consumers may fair, as this is... Attachments: CS-5-question....docx Mar 04 2013 08:52 PM

 

Solution ID:608974 | This paper was updated on 26-Nov-2015

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