Net Present Value, Mergers and Acquisitions

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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 for 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 position
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