Strategic Corporate Finance Mod 5 Case Assignment Essay

St reckongic Corpo pose Finance Mod 5 Case Assignment - Essay ExampleNet Present Value (NPV) method is one of the close to important methods used to make capital budgeting decisions by businesses today. NPV method is important because it helps financial managers maximize shareholders wealthiness by making better capital budgeting decisions. Basically we can determine whether a project is deserving dressment funds in or not by comparing the present value of inflows and outflows discounted at the rate of cost of capital. If the PV of net flows is exacting (PV of inflows is more than the PV of outflows over the life of the project), we consider it a good investing because it will increase shareholder wealth, and vice versa. In other words, must have a positive net inflow. In the given scenario, T-Mobile Corporation is considering a new project that will cost $3,219,000. This is the initial cash outflow. The company has provided the following cash flow figures Year Cash Flow 0 -$3, 219,000 1 350,000 2 939,000 3 1,122,000 4 500,000 5 400,000 We are told that T-Mobiles cost of capital discount rate is 4%, and are required to calculate the projects net present value. PV of Cash Inflows = 350000/(1.04)1 + 939000/(1.04)2 + 1122000/(1.04)3 +500000/(1.04)4 + 400000/(1.04)5 350000/1.04 + 939000/1.0816 + 1122000/1.1248 + 500000/ 1.1698 + 400000/ 1.2166 336538.46 + 868158.28 + 997510.66 + 427423.49 + 328785.13 $2,958,416.02. NPV= PV of Inflows PV of Outflows NPV =$2,958,416.02 3,219,000 NPV= (260,583.98) Since the NPV is negative, or the PV of inflows is less than the PV of outflows for the project, investing in it will decrease shareholder wealth. The investment opportunity should be rejected. Even at the higher(prenominal) discount rate of 6%, the PV of inflows would decrease further, and the decision would be the same i.e. it is better not to invest here. Part II T-Mobile- dash Merger Mergers and acquisitions are usually the two routes chosen by corporate entities to dramatize their businesses in the marketplace. These are often a hot topic in the business press (McClure, 2011). cardinal rumor being floated around is a potential merger amongst mobile phone giants T-Mobile and Sprint. Mergers between two large companies are usually complicated, even though there may be assertable synergies in 4G technologies that might be possible in such an instance. While mergers can bring approximately great rewards, at the same time they can also entail great risks and pitfalls. Differences in valuation, differences in accounting procedures and operational and administrative difficulties may emerge (Gaughan, (2001). This part of the assignment asks us to do most research concerning the arguments both(prenominal) for and against such a merger from a financial perspective. We are considering the deal from the send of view of whether or not such a merger would be a profitable labor movement that would add value to the shareholders of both corporation s or not. Do you think a merger between Sprint and T-Mobile would add value to the shareholders of both corporations? Based on your analysis and findings (Part I and Part II), what would you recommend to the shareholders of both corporations? Should both companies merge? Please explain your reasoning. From the point of view of synergistic benefits, there is certainly a lot of merit in seeking to merge Sprint and T-Mobile. As of the date of the article in July 2010, both Sprint