Question
Motorola Mobility LLC is a companythat develops mobile devices . Headquartered in Chicago , Illinois , United States, the company was formed on January 4,
Motorola Mobility LLCis a companythat developsmobile devices. Headquartered inChicago,Illinois, United States, the company was formed on January 4, 2011 by the split ofMotorola Inc.into two separate companies; Motorola Mobility took on the company's consumer-oriented product lines, including itsmobile phonebusiness and itscable modemsandset-top boxesfordigital cableandsatellite televisionservices, whileMotorola Solutionsretained the company's enterprise-oriented product lines.Early 2012, Google decided to purchase Motorola mobility LLC for $12.5b. Google had a plan to keep Motorola mobility for 5 years. Google financial analysis team made the following forecasts:
Year-Cash flow(in billions)-Net income (in billions)
2012-1.5-1
2013-2.5-2
2014-4-3
2015-3-2
2016-6 (includes 3.5b selling price)-1.5
And that the average book value of asset is $8b and Google's required rate of return is its WACC.
7- Calculate net present value (NPV) for the above investment decision. Would you accept or reject this investment decision? Why?
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