William Hill Plc acquired 624 betting shops of Stanley Leisure an Coursework

William Hill Plc acquired 624 betting shops of Stanley Leisure an Evaluation - Coursework Example The researcher states that there are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has two choices whether to go for an organic growth or to go for acquisition or a combination of both. For organic growth, the companies generally expand their business operations by opening up new branches, adding up new product lines etc. On the other hand, for acquisitions, the companies generally purchase an existing business such that the company owns that business and in this way it brings expansion in its existing business operations. Capital budgeting is a tool which is used to evaluate the financial viability of the projects whether in the form of organic growth or in acquisitions. In this technique the future cash flows are estimated including both the outflows and the inflows pertaining to that project after which net cash flows are computed. Those net cash flows are discounted by a re levant cost of capital of the company to arrive at the present values of all the net cash flows. Those net cash flows are then summed up to obtain the Net Present Value of the project. The NPV is then used as a tool to decide whether a project is feasible or not such that if the NPV figure is positive, then the project should be accepted and if it comes as a negative figure, then that project is advised as not to be accepted. Capital budgeting also has some other related criteria for checking the viability of the projects. ... The NPV is then used as a tool to decide whether a project is feasible or not such that if the NPV figure is positive, then the project should be accepted and if it comes as a negative figure, then that project is advised as not to be accepted. Capital budgeting also has some other related criteria for checking the viability of the projects. Those criteria include Internal Rate of Return, Profitability Index, Discounted Payback and other similar techniques. Most of these techniques work on the basic principle of discounted cash flows. These financial projections and the computation of NPV are generally prepared by the finance departments of the companies and they are used for internal reporting purposes. Those kinds of information are not disclosed to the general public because these valuations can certainly influence the share price of the company as there are likelihoods that investors may welcome those valuations and in this way share prices can be increased. If the valuations are not consistent with shareholders’ expectations, then there comes a decline in the share prices. If the projects are not likely to influence the existing operations and financial results of the company, then the shareholders might remain indifferent as to which way they should react. In case of acquisitions, generally when the terms and conditions of the purchase are settled, then some of the details of the proposed acquisitions are disclosed to the shareholders. The company does not provide them the comprehensive financial prospects and projections of the acquisition deal, rather it provides the necessary information to the shareholders such as purchase price, amount of goodwill, total amount of synergies that can be obtained from the acquisition, the capital