RiverRocks, whose WACC is 11.7%, is considering an acquisition of Raft Adventure

Question

RiverRocks, whose WACC is 11.7%, is considering an acquisition of Raft Adventures (whose WACC is 14.8%). What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why?

RiverRocks, whose WACC is 11.7%, is considering an acquisition of Raft Adventures (whose WACC is 14.8%). 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. O B. ° C. An average WACC from RiverRocks and Raft Adventures will best account for the risk of Raft Adventures, cash flows. The risk-free rate will best account for the risk of Raft Adventures' cash flows since RiverRocks will pay cash for the transaction. Raft Adventures' WACC is the most appropriate discount rate to account for the risk of Raft Adventures, cash flows. RiverRocks' WACC is the most appropriate discount rate to account for the risk of Raft Adventures' cash flows. D.

Explanation / Answer

discount rate =14.8% is answer

C

the above is the correct option

as we should use that companys cost of capital only for which we are using cash flows.

the above is the answer

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