RiverRocks, whose WACC is 11.3%, is considering an acquisition of Raft Adventures (whose WACCC is 15.5%). What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why? %. (Round to one decimal The appropriate discount rate for RiverRocks to use to evaluate the acquisition is place.) Why? (Select the best choice below.) O A. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. O B. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction. OC. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. O D. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows.

RiverRocks, whose WACC is 11.3%, is considering an acquisition of Raft Adventures (whose WACCC is 15.5%). What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why? %. (Round to one decimal The appropriate discount rate for RiverRocks to use to evaluate the acquisition is place.) Why? (Select the best choice below.) O A. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. O B. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction. OC. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. O D. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows.

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

Problem 1PS

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Sunland Homes Company is considering the acquisition of Oriole, Inc. early in 2025. To assess the amount, it might be willing to pay. Sunland Homes makes the following computations and assumptions. A B Oriole, Inc. has identifiable assets with a total fair value of $15,030,000 and liabilities of $8,815,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and land with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Oridle, Inc. Oriole, Inc's pretax incomes for the years 2022 through 2024 were $1,200,900, $1,500,800, and $955,000, respectively. Sunland Homes believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments to the following items included in pretax eamings: Depreciation on buildings (each year) C 962,900…
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RiverRocks (whose WACC is 12.7%) is considering an acquisition of Raft Adventures (whose WACC is 14.6%) . 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.)
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21.

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