Question

RiverRocks, Inc., is considering a project with the following projected free cash​ flows:

Year	0	1	2	3	4
Cash Flow ​(in millions)	negative $ 50.8−$50.8	$ 9.3$9.3	$ 19.6$19.6	$ 19.3$19.3	$ 14.1$14.1

The firm believes​ that, given the risk of this​ project, the WACC method is the appropriate approach to valuing the project.​ RiverRocks' WACC is

12.6 %12.6%.

Should it take on this​ project? Why or why​ not?

The net present value of the project is

​$negative 4.791−4.791

million.  ​(Round to three decimal​ places.)

RiverRocks

should not

should

should not

take on this project because the NPV is

negative

negative

positive

. ​(Select from the​ drop-down menus.)

Answer 1

Excel formulaes in case if you need.