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17. a. Wham-o makes Frisbees, Hacky Sacks, and Yo-Yos. Wham-o is about to invest in The Lake Lansing Amusement Park, an amusement park with pumper
17. a. Wham-o makes Frisbees, Hacky Sacks, and Yo-Yos. Wham-o is about to invest in The Lake Lansing Amusement Park, an amusement park with pumper cars, petting zoo, an aging Ferris wheel, and a miniature golf course. Wham-O's WACC is 15%. But it thinks that the amusement park business could have different risks than a toy firm. To evaluate the NPV of Lake Lansing Amusement Park, it needs to pick a discount rate. Since Wham-o is bigger than the tiny Lake Lansing Amusement Park, it should use 15% as the WACC for the Park. b. Wham-O should use the risk free rate for evaluating the Lake Lansing Wham-O should try to find another firm with some elements of petting 200, or Ferris wheel, or miniature golf course, or pumper cars and use that firm as a Pure Play. d. It is not possible to discount the cash flows of the Lake Lansing Amusement Park. Park. C. en calling
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