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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Transcribed Image Text:RiverRocks, whose WACC is 11.3%, is considering an acquisition of Raft Adventures (whose WACC is 15.5%).
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.)
O A. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures'
cash flows.
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.
D. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures'
cash flows.
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