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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Similar questions

A subsidiary entity, Crystal Ltd, is for sale at a price $ 6 million. There has been some interest from prospective buyers but no sale as yet. One buyer has made an offer of $ 5 million but the directors of the parent company have declined the offer. An accountant firm which was appointed by the parent company has just submitted a report and advice that the fair value of Crystal Ltd is $ 7.5 million. They have decided not to lower the sale price of Crystal Ltd at the moment. Discuss whether the subsidiary can be classified as held for sale. Please refer to above details when answering.
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.)
Miss Houri, Inc. is considering to buy project Holly from the Wood, Inc. WACC should be computed from the pot of view of Miss Houri corporation O Project Holly as would be managed by Miss Houri Project Holly as is managed by Wood corporation Project Holly as a stand-alone project
The terminal cap rate used for valuation purposes in a DCF is fundamentally different than the discount rate used in that same DCF. The assumed sale of the property takes place at the end of your hold period, generally 10 years later in most models. The property is older and the market and the economy have changed. With that said, what do you believe to be the right approach for terminal cap rate selection in a DCF on a development project and why?
Laurel Enterprises expects earnings next year of $4.00 per share and has a 40% retention rate, which it plans to keep constant Its equity cost of capital is 10%, which is also its expected return on new investment. Its eamings are expected to grow forever at a rate of 4,0% per year. If its next dividend is due in one year, what do you estimate the firm's current stock price to be? The current stock price will be S (Round to the nearest cent.) Little Rock, AR 72205
3.
Hoolia Corporation acquires equipment and patents from another company for $50 million and records the acquisition as an asset acquisition. The equipment has a fair value of $19.20 million and the patents have a fair value of $28.80 million. Neither asset is nonqualifying. At what value does Hoolia record the equipment? Select one: a. $25.0 million b. $20.0 million c. $21.2 million d. $19.2 million
Blossom Company is considering the acquisition of Splish, Inc. To assess the amount it might be willing to pay, Blossom makes the following computations and assumptions. A. Splish, Inc. has identifiable assets with a total fair value of $6,014,000 and liabilities of $3,728,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 25% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Splish, Inc. B. Splish, Inc's pretax incomes for the years 2020 through 2022 were $470,600, $572,300, and $371,100, respectively. Blossom 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 for the following items included in pretax earnings: Depreciation on Buildings (each year) 384,800 Depreciation on Equipment (each year) 31,100…
Suppose that an acquirer decides to pay a 25% premium to buy Uber. The book value of Uber’s net assets is $6.7 million. The fair value of Uber’s net assets is estimated at $7 million. What amount of goodwill will be recorded in this acquisition? Question 14Answer a. $75,000 b. $8,750,000 c. $1,675,000 d. $1,750,000
21.

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