What is Internal Rate of Return? Internal Rate of Return (IRR) is a financial metric used to measure the profitability of an investment. It is the interest rate at which the net present value (NPV) of an investment's future cash flows is equal t…
In the negotiation process for a typical merger, we're going to go through each one of the steps one by one. So let's start with: The Initial Approach It could be initiated by either the buyer or the seller . For the buyers, you've got…
Mergers could be financed with securities cash or a combination thereof, and in this article, I'm going to show you examples of each of these different types of considerations being offered in an actually proposed merger. So let's start with…
If you've ever heard the term "Consideration" in the context of mergers and acquisitions, consideration is what the bidding company pays for the target company. There are several different types of considerations in a merger you could…
Here we're gonna discuss three types of mergers, Horizontal Mergers Vertical Mergers Conglomerate Mergers Horizontal Mergers: A horizontal merger is when two competing companies combined with each other. An example would be in 2013 when Of…
In a perfect world, the company would accept all the positive NPV projects that come its way but in reality, we have things called constraints . For example, you might have a limited budget, and your manager says "look you can't go beyond…
As we discussed in the last article, the dividend discount model could be used to come up with a valuation for a firm based on the number of dividends that we expect that the firm is going to issue over time. So we can value the firm by taking their…
So previously we talked about the dividend discount model and that was how we would value the firm as a stream of dividends into the future and we would take the present value and discount those dividends to the present. Then there was the total pa…
We're going to talk about what the weighted average cost of capital is and how you would go about calculating it and then we'll walk through an example. When we think about WACC this weighted average cost of capital really what we've got…
The most widely known model for estimating the expected return of a security is the capital asset pricing model where it's modeling the expected return as a function of a single factor which is capturing systemic risk. This systemic risk is bet…
We start by looking at the capital asset pricing model and we modeled the expected return of security (Ri) as a function of the risk-free rate of return plus beta for that security which is a measure of systemic risk and then we multiply that by …
If we go back to the capital asset pricing model , you’ll see that the expected return of security (Ri) is equal to the risk-free rate of return (Rf) plus beta (βi) for the security, which is a measure of systemic risk and we multiply that by th…
