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 ___%.
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 ___%.
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
10.) RiverRocks (whose WACC is 12.6%) is considering an acquisition of Raft Adventures (whose WACC is 15.2%). 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.)
Transcribed Image Text:RiverRocks (whose WACC is 12.6%) is considering an acquisition of Raft Adventures (whose WACC is 15.2%). 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. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures' cash flows.
O B. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows.
OC. Raft Adventures' 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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education