RiverRocks, whose WACC is 11.7 11.7 %, is considering an acquisition of Raft Adventures (whose WACC is 15.6 15.6 %). The purchase will cost $ 100.7 $100.7 million and will generate cash flows that sta...
RiverRocks, whose WACC is 11.7 11.7 %, is considering an acquisition of Raft Adventures (whose WACC is 15.6 15.6 %). The purchase will cost $ 100.7 $100.7 million and will generate cash flows that start at $ 14.6 $14.6 million in one year and then grow at 3.7 % 3.7% per year forever. What is the NPV of the acquisition? The net present value of the project ? million. (Round to two decimal places.)
Homework Answers
NPV = Present value of cash inflows - Cash outflow at year 0
Present value of cash inflows can be calculated using discounted cash flow analysis:
NPV = $122.6891 mil - $100.7 mil
NPV = $21.99 mil
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