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Issue: Business
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Date added: November 25, 2002
No of pages / words: 5 / 1368
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These quantities must be estimated, and the ensuing estimates will contain some degree of uncertainty; the process in inherently risky (Risk, 2004). The acquisition of one firm by another is, of course, an investment made under uncertainty. The basic principle of valuation applies: A firm should be acquired if it generates a positive NPV to the shareholders (Ross, 2005, pg 795)...
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The basic principle of valuation applies: A firm should be acquired if it generates a positive NPV to the shareholders (Ross, 2005, pg 795). NPV is the difference between the present value of cash inflows and the present value of cash outflows (Investopedia, 2007). I began by analyzing and comparing the NPV of both companies...
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