RiverRocks (whose WACC is 11.4%) is considering an acquisition of Raft Adventures (whose WACC is 15.2%). What is the appropriate discount rate for RiverRocks touse 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. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows.O B. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows.O C. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows.O D. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction.

WACC is the weighted cost of all sources of capital used by the Company. It is the sum of (Weights*…

Answered: RiverRocks (whose WACC is 11.4%) is…

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…
10. RiverRocks (whose WACC is 12.7%) is considering an acquisition of Raft Adventures (whose WACC is 14.8%). The purchase will cost $100.2 million and will generate cash flows that start at $15.9 million in one year and then grow at 4.5% per year forever. What is the NPV of the acquisition? The net present value of the project is $____million. (Round to two decimal places.)
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
In early 2024, Menz Corporation acquired NeuroLab to obtain technology that NeuroLab was in the process of developing. The total acquisition cost included $2 million for this technology. At the time of acquisition, the technology had not yet reached the point of technological feasibility. During the remainder of 2024, Menz spent an additional $1 million to improve the technology, which then reached the point of technological feasibility by the end of the year. The new technology was expected to provide benefits to Menz over the subsequent five years. What amount of research and development expense would Menz record in 2024? Multiple Choice $2 million $3 million O $1 million $0
Assume that a drilling machine is acquired for the following consideration: cash: $200,000 shares: 20,000 shares with a market value of $4.50 each Machine: Cost $100,000, accumulated depreciation, $75,000, fair value $37,000 The buying company also agrees to assume the liability of the selling company’s accounts payable of $25 000 as part of the drilling machine acquisition. Required: Calculate the acquisition cost of the drilling machine
RiverRocks (whose WACC is 12.7%) is considering an acquisition of Raft Adventures (whose WACC is 15.3%). The purchase will cost $100.5 million and will generate cash flows that start at $14.1 million in one year and then grow at 4.2% per year forever. What is the NPV of the acquisition? The net present value of the project is $ million. (Round to two decimal places.)
Acme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agricultural use. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how to develop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is, office or retail. Based on its estimates, the land could be developed as follows: Rentable square feet Rents per square foot Operating expense ratio Average growth in NOI per annum Required return (r) Total construction cost per square foot Office 100,000 $ 42.00 Required: Which would be the highest and best use of this site? Which would be the highest and best use of this site? 40% 3% 13% $118 Retail 80,000 $ 52.50 50% 3% 14% $118
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

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