RiverRocks (whose WACC is 11.8%) is considering an acquisition of Raft Adventures (whose WACC is 15.2%). The appropriate discount rate for RiverRocks to use to evaluate the acquisition is ___ %? What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why? A. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. B. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. C. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows. D. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction.
RiverRocks (whose WACC is 11.8%) is considering an acquisition of Raft Adventures (whose WACC is 15.2%). The appropriate discount rate for RiverRocks to use to evaluate the acquisition is ___ %? What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why? A. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. B. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. C. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows. D. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction.
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
Related questions
Question
RiverRocks (whose WACC is 11.8%) is considering an acquisition of Raft Adventures (whose WACC is
15.2%).
The appropriate discount rate for RiverRocks to use to evaluate the acquisition is ___ %?
What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why?
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