Question: 1. RiverRocks (whose WACC is 12%) is considering an acquisition of Raft Adventures (whose WACC is 15%). Is 12% the appropriate discount rate for RiverRocks

1. RiverRocks (whose WACC is 12%) is considering an acquisition of Raft Adventures (whose WACC is 15%). Is 12% the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Yes or No

2. Company A primarily sells coffee. It recently introduced a new coffee-flavored liquor. Suppose the firm faces a tax rate of 35% and collects the following information.

Beta %Debt
Company A 1.13 71%
A standard coffee liquors Company 0.93 89%

If it plans to finance 89% of the new liquor-focused division with debt and the rest with equity, what WACC should it use for its liquor division? Assume a cost of debt of 5.64%, a risk-free rate of 5.63%, and a risk premium of 7.8%.

3. You have started a company and a venture capitalist has offered to invest. You own 100% of the company with 5,943,368 shares. The VC offers $1,932,638 for 1,316,749 new shares.

What is the implied price per share?

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