Question
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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