Hi Chris,
Is this after you have selected the watershed outlet points? It sounds as though there is a problem with the gdb that your Raster grids are stored in. What I would do first is just do a quick restart of your comp, that usually fixes floating bugs such as these. If you don't want to do that then I suggest closing all instances of ArcMap and then reload your project .mxd.
If none of the above steps work then it may be a problem with where you have your project saved and what admin rights you are operating under. Make sure you have complete admin rights on the computer you are using and although this is a tad old school I found that not including spaces in file names for my project eliminated a similar error awhile ago.
If none of these steps work let me know and we can try and work something else out.
Jonathan
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Jonathan Knox
GIS and Environmental Modeling Technician,
McGill University Dept. of Biology,
Montreal, QC, Canada
Email:
jonath...@mail.mcgill.ca