RiverRocksRiverRocks

$($whose WACC is

$12\mathrm{.}3\%12\mathrm{.}3\%)$

is considering an acquisition of

Raft AdventuresRaft$$Adventures

$($whose WACC is

$15\mathrm{.}7\%15\mathrm{.}7\%).$

What is the appropriate discount rate for

RiverRocksRiverRocks

to use to evaluate the$$acquisition$?$ Why?

Question content area bottom

Part $1$

The appropriate discount rate for

RiverRocksRiverRocks

to use to evaluate the acquisition is

enter your response here$\%.$

$($Round to one decimal$$place$.)$

Part $2$

$$Why$?($Select the best choice$$below$.)$

A$.$

The$$risk$-$free rate will best account for the risk of

Raft AdventuresRaft$$Adventures$\text{'}$

cash flows since

RiverRocksRiverRocks$\text{'}$

will pay cash for the transaction.

B$.$

An average WACC from

RiverRocksRiverRocks

and

Raft AdventuresRaft$$Adventures

will best account for the risk of

Raft AdventuresRaft$$Adventures$\text{'}$

cash flows.

C$.$

RiverRocksRiverRocks$\text{'}$

WACC is the most appropriate discount rate to account for the risk of

Raft AdventuresRaft$$Adventures$\text{'}$

cash flows.

D$.$

Raft AdventuresRaft$$Adventures$\text{'}$

WACC is the most appropriate discount rate to account for the risk of

Raft AdventuresRaft$$Adventures$\text{'}$

cash flows.