Finance 501 Corprate Finance
The Net Present Value, Mergers and Acquisitions Michael D. Black
Trident University Module 5 CASE Finance 501: Strategic Corporate Finance
Professor: Walter Witham
June 15, 2012
Net Present Value, Mergers and Acquisitions
Abstract
Financial managers must understand the value of dollars invested today in order to make decisions as to what capital ventures are worth pursuing for business growth. The money a business is willing to invest in new equipment or expansion opportunities must provide positive cash flows. This revenue can be earned through operational income growth or cutting costs resulting in savings. One of the purposes of this paper is to explain the concept of Net Present Value to Micron shareholders so they have an understanding whether to vote in favor or against the company taking on a new project costing $3,219,000. The next topic for analysis is whether a merger between Elpida Memory, Micron Technology and Nanya Technology will benefit shareholders for each company. Lastly, I’ll share what learning objectives I have mastered.
Net Present Value, Mergers and Acquisitions
Financial managers must understand the value of a dollar invested today in order to make decisions as to what capital ventures/projects the company should engage in to expand business operations, earn a profit and increase shareholder wealth. The idea that a dollar today is worth more than a dollar in the future is true, because a dollar wisely invested today can be used to generate future earnings. The money a business is willing to invest in new equipment or expansion opportunities must provide positive cash flows. It doesn’t matter whether these cash flows are earned through operational activities or cost cutting measures but that they add value to the company. Two approaches to making capital budgeting decisions use discounted cash flows. “One is the net present value method and the other is the internal rate of return
Trident University Module 5 CASE Finance 501: Strategic Corporate Finance
Professor: Walter Witham
June 15, 2012
Net Present Value, Mergers and Acquisitions
Abstract
Financial managers must understand the value of dollars invested today in order to make decisions as to what capital ventures are worth pursuing for business growth. The money a business is willing to invest in new equipment or expansion opportunities must provide positive cash flows. This revenue can be earned through operational income growth or cutting costs resulting in savings. One of the purposes of this paper is to explain the concept of Net Present Value to Micron shareholders so they have an understanding whether to vote in favor or against the company taking on a new project costing $3,219,000. The next topic for analysis is whether a merger between Elpida Memory, Micron Technology and Nanya Technology will benefit shareholders for each company. Lastly, I’ll share what learning objectives I have mastered.
Net Present Value, Mergers and Acquisitions
Financial managers must understand the value of a dollar invested today in order to make decisions as to what capital ventures/projects the company should engage in to expand business operations, earn a profit and increase shareholder wealth. The idea that a dollar today is worth more than a dollar in the future is true, because a dollar wisely invested today can be used to generate future earnings. The money a business is willing to invest in new equipment or expansion opportunities must provide positive cash flows. It doesn’t matter whether these cash flows are earned through operational activities or cost cutting measures but that they add value to the company. Two approaches to making capital budgeting decisions use discounted cash flows. “One is the net present value method and the other is the internal rate of return
References: McGrath, Drake, 2011 Micron-Elpida merger would redraw DRAM markethttp Retrieved June 14, 2012 from://www. eetimes.com/electronics-news/4236402/Micron-Elpida-merger-would-redraw-DRAM-market Hanley, T. H, "The Competitive State of the U.S. Commercial Banking Industry," CS First Boston, Retrieved June 14, 2012 from http://www.albion.com McCoy J.B & Frieder L.A, “BottomLine Banking, (Chicago: Probus Publishing Co., 2005) Retrieved on June 13, 2012 from http://legal-dictionary.thefreedictionary.com/Merger s+and+Acquisitions Econedlink.org (2012). The time value of money. Retrieved June 13, 2012, from http://www.econedlink.org/lessons/index.cfm?lesson=EM37 Retrieved June 14, 2012 http://financial-dictionary.thefreedictionary.com/Time+ value+of+money Uwf.edu (n.d.). Time value of money. Retrieved June 12, 2012 from http://www. financeprofessor.com /financenotes /introductoryfin/timevalueofmoney.html