RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 0 2 Cash Flow - $50.1 $20.9 (in millions) The timeline for the project's cash flows is: (Select the best choice below.) O A. Cash Flows (millions) - $50.1 Year 0 OB. Cash Flows (millions) $50.1 The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.5%. Should it take on this project? Why or why not? Year OC. Cash Flows (millions) - $50.1 0 Year 0 O D. Cash Flows (millions) $50.1 - $9.8 1 $9.8 + 1 1 $9.8 $9.8 + 1 - $9.8 - $20.9 2 $20.9 + 2 $20.9 + 2 - $20.9 - $19.3 3 $19.3 + 3 3 $19.3 $19.3 + 3 -$19.3 - $14.7 4 $14.7 4 $14.7 4 4 $14.7 - $14.7 …...

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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RiverRocks, Inc., is considering a project with the following projected free cash flows:
Year
0
Cash Flow
- $50.1
(in millions)
A. Cash Flows (millions) - $50.1
The timeline for the project's cash flows is: (Select the best choice below.)
Year
B. Cash Flows (millions)
The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.5%. Should it take on this project? Why or
why not?
Year
C. Cash Flows (millions)
Year
D. Cash Flows (millions)
Year
0
$50.1
0
- $50.1
0
$50.1
0
- $9.8
1
$9.8
1
$9.8
1
1
$9.8
- $9.8
1
- $20.9
2
$20.9
2
$20.9
2
2
$20.9
- $20.9
+2
- $19.3
3
$19.3
3
$19.3
3
- $19.3
3
$19.3
3
- $14.7
4
$14.7
4
$14.7
4
- $14.7
4
$14.7
4
Transcribed Image Text:RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 0 Cash Flow - $50.1 (in millions) A. Cash Flows (millions) - $50.1 The timeline for the project's cash flows is: (Select the best choice below.) Year B. Cash Flows (millions) The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.5%. Should it take on this project? Why or why not? Year C. Cash Flows (millions) Year D. Cash Flows (millions) Year 0 $50.1 0 - $50.1 0 $50.1 0 - $9.8 1 $9.8 1 $9.8 1 1 $9.8 - $9.8 1 - $20.9 2 $20.9 2 $20.9 2 2 $20.9 - $20.9 +2 - $19.3 3 $19.3 3 $19.3 3 - $19.3 3 $19.3 3 - $14.7 4 $14.7 4 $14.7 4 - $14.7 4 $14.7 4
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