Question
RiverRocks, whose WACC is 12.6%?, is considering an acquisition of Raft Adventures? (whose WACC is 14.4%?). What is the appropriate discount rate for RiverRocks to
RiverRocks, whose WACC is 12.6%?, is considering an acquisition of Raft Adventures? (whose WACC is 14.4%?). What is the appropriate discount rate for RiverRocks to use to evaluate the? acquisition? Why?
The appropriate discount rate for RiverRocks to use to evaluate the acquisition is
_____?%.
? (Round to one decimal? place.)
?Why????(Select the best choice? below.)
A.?RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft? Adventures' cash flows.
B.Raft? Adventures' WACC is the most appropriate discount rate to account for the risk of Raft? Adventures' cash flows.
C.An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft? Adventures' cash flows.
D.The? risk-free rate will best account for the risk of Raft? Adventures' cash flows since RiverRocks will pay cash for the transaction.
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Capital Budgeting
Authors: Pamela P. Peterson
1st Edition
0471218332, 9780471218333
