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RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 0 1 2 3 4 Cash Flow (in millions) $50.3 $9.9

RiverRocks, Inc., is considering a project with the following projected free cash flows:

Year

0

1

2

3

4

Cash Flow

(in millions)

$50.3\

$9.9

$ 19.2$19.2

$ 19.4$19.4

$ 15.8$15.8

The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is

11.8 %11.8%.

Should it take on this project? Why or why not?

The timeline for the project's cash flows is: (Select the best choice below.)

A.

Cash Flows left parenthesis millions right parenthesisCash Flows (millions)

negative $ 50.3$50.3

negative $ 9.9$9.9

negative $ 19.2$19.2

negative $ 19.4$19.4

negative $ 15.8$15.8

YearYear

00

11

22

33

44

B.

Cash Flows left parenthesis millions right parenthesisCash Flows (millions)

$50.3

$9.9

$19.2

$19.4

$15.8

Year

0

1

2

3

4

C.

Cash Flows left parenthesis millions right parenthesisCash Flows (millions)

$50.3

$9.9

$19.2

$19.4

$15.8

Year

0

1

2

3

4

D.

Cash Flows left parenthesis millions right parenthesisCash Flows (millions)

$50.3

$9.9

$19.2

$19.4

$15.8

Year

0

1

2

3

4

The net present value of the project is

$nothing

million.(Round to three decimal places.)RiverRocks

should not

should

take on this project because the NPV is

negative

positive

.

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