Session 14: Acquisition Analysis and Investment Decision Rules

In this class, we started by looking at an acquisition as a really big project, and argued that the same rules should apply to acquisitions as to regular projects. The cash flows should include any side benefits and costs and the cost of capital you use should reflect the risk of the project (target company), not the entity looking at the project (acquiring firm). We then looked at investment analysis approaches, first contrasting NPV and IRR and why they might give you different decisions, and noted the differences in reinvestment assumptions.
Slides: www.stern.nyu.e...
Post class test: www.stern.nyu.e...
Post class test solution: www.stern.nyu.e...

[@siddharthsidselvamohan2051]

3:22

[@ThisisAungMyoMyint]

10:30 start of lecture

[@imxtramin]

Thank you Professor.

[@rahulsachdeva3172]

On pg 280, why is the expected cash flow next year not discounted back to present value using (1+r)?

[@abhishek1990iowa]

Thank you sir

[@marcostodeschini5265]

why not use the dpi of each project?

[@marcostodeschini5265]

IRR is a terrible pain

[@PeterXian]

Drug dealers indeed.