Essay Instructions: There are two parts to my assignment part on the case assignment and part two the session long project. In part two the session long project my company is cardinal health. I would like to request two pages for the Case study and two pages for the session long project.
Net Present Value, Mergers, and Acquisitions
One of financial goals of the financial managers is to maximize the shareholders? wealth. Therefore, merger and acquisition decisions should be consistent with shareholder wealth maximization criteria and financial characteristics of the targets should be considered in the decision process. The NPV method is one of the useful methods that help financial managers to maximize shareholders? wealth.
Module 5 Case Assignment has two parts. Part I of this case assignment is related to capital budgeting decision and part II is about mergers and acquisitions. Please read both parts carefully before you start answering the questions.
Part 1:
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 Micron Technology (NasdaqGS: MU - http://ca.finance.yahoo.com/q?s=MU&ql=0) is considering a new project that will cost $2,225,000 (initial cash outflow). The company has provided the following cash flow figures to you:
Year
Cash Flow
0
-$2,225,000
1
350,000
2
939,000
3
720,000
4
500,000
5
900,000
If the Micron Technology?s cost of capital (discount rate) is 9%, 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 Micron Technology? Should the project be accepted? The shareholders of Micron Technology 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.
Brealey, R.A., Myers, S.C., & Allen, F. (2005). Principles of corporate finance, 8th Edition. The McGraw?Hill. Retrieved May, 2012, from http://jcooney.ba.ttu.edu/fin3322/Brealey%20Files/Appendix%20A%20-%20Present%20Value%20Tables.pdf (Please use Table 1)
Part II:
Elpida Memory in Talks to Merge with Micron Technology and Nanya Technology
Rumors about potential mergers are often a hot topic in the business press. Japan's Elpida Memory (ELPDF.PK - http://ca.finance.yahoo.com/q?s=ELPDF.PK&ql=1) is in talks to merge with U.S. firm Micron Technology (NasdaqGS: MU.O - http://ca.finance.yahoo.com/q?s=MU&ql=0) and Taiwan's Nanya Technology (2408.TW - http://ca.finance.yahoo.com/q?s=2408.TW&ql=0).
As you know from reading the material in the background materials, mergers can bring about great rewards but also can bring great risks and pitfalls. For this assignment, do some research concerning the arguments both for and against such a merger from a financial perspective. For this module we are not so concerned with how consumers may fair, as this is an issue for the government to consider if they have to approve this merger. Instead you are considering this from the point of view of whether or not such a merger would be a profitable undertaking that would add value to the shareholders of three corporations (Elpida Memory, Micron Technology, and Nanya Technology).
The following article provides information on the potential mergers of Elpida Memory, Micron Technology, and Nanya Technology:
Reynolds, I., Kubo, N., Fuse, T., & Shiraki, M. (2012). Elpida in talks to merge with Micron, Nanya: Report. Retrieved August, 2012 from http://www.reuters.com/article/2012/01/24/us-elpida-idUSTRE80M2IZ20120124
But do not limit yourself to this article. Use Proquest, EbscoWeb, and other sources in the Cyberlibrary. Use various internet search engines such as news.google.com for the latest news on this merger. Look at the web-pages for Yahoo and Microsoft. Then write a five to seven pages report for the shareholders of Elpida Memory, Micron Technology, and Nanya Technology by answering the following questions and the questions in part I:
1) Do you think Elpida Memory?s merger with Micron Technology and Nanya Technology would add value to the shareholders of all three corporations?
2) Based on your analysis and findings (Part I and Part II), what would you recommend to the shareholders of Elpida Memory, Micron Technology, and Nanya Technology corporations? Should all three companies merge? Please explain your reasoning.
The main focus of this assignment will be answering the questions above and the questions in part I.
In your answers to the primary questions in part II, please respond to following issues:
?The impact on Elpida Memory shareholders
?The impact on Micron Technology shareholders
?The impact on Nanya Technology shareholders
?The financial conditions of all three corporations (do not forget to consider the new project proposed by Micron Technology in part I)
?Why might, all three companies combined as one company, be more profitable than they would if they remain independent? What are the success factors in these mergers?
?Potential pitfalls - might the combined entity actually be less profitable than either company operating independently? What are the risk factors in these mergers?
In addition to making use of concepts from the background materials for this module, feel free to use concepts from Modules 1-4 as well.
3) What do you perceive you have learnt in Module 5 Case Assignment? Which of the following learning objectives do you feel you have mastered?
?Describe and apply net present value (NPV) method to make capital budgeting decisions
?Identify success factors in mergers and acquisitions
?Explain and discuss financing options for financing mergers and acquisitions
?Apply principles of risk and valuation analysis to mergers and acquisitions
Please provide your evaluation of the Module 5 Case Assignment in brief.
Session long project COMPANY NAME CARDINAL HEALTH
Net Present Value, Mergers, and Acquisitions
For this SLP, think about your SLP company and the possibility of it merging with another company. Write a two to three page paper answering the following questions:
1) If you were to pick one company for your SLP company to merge with, what would it be? Explain your choice with respect to possible benefits of this merger and why you would choose this company over any other choice for a potential.
2) How would you finance a takeover of this chosen corporation? Please explain your reasoning.
3) What would your second and third choices be for a merger with your SLP company? Again, explain your reasoning for wanting to merge with these companies, and why they would be second or third choices rather than your first choice.
Remember to make use of the background materials in your analysis as well as additional research. Please reference all of your main sources of information, and use multiple references in your analysis.
4) What do you perceive you have learnt in Module 5 SLP? Which of the following learning objectives do you feel you have mastered?
?Explain and discuss financing options for financing mergers and acquisitions
?Identify success factors in mergers and acquisitions
Please provide your evaluation of the Module 5 SLP in brief.
NOTE: Please note that your report/assignment will not be accepted without proper citations and references. You must use the sources from the background material together with the sources you find your own. It is also REQUIRED that you answer all the questions related to learning outcomes.
Session Long Project (SLP) Expectations:
In Module 5 SLP, you are expected to:
?Describe the purpose of the paper and conclusion.
