(Solution) - RiverRocks realizes that it will have to raise the financing -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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RiverRocks realizes that it will have to raise the financing for the acquisition of Raft Adventures (described in Problem 19) by issuing new debt and equity. The firm estimates that the direct issuing costs will come to $7 million. How should it account for these costs in evaluating the project? Should RiverRocks go ahead with the project?