What is the profitability index of project

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Reference no: EM132062748

1. Selma's Sushi is trying to decide whether to invest in a new line of business selling premade sushi in the refrigerated section at grocery stores. Assume that their capital structure consists of 32% common stock, 18% preferred stock, and 50% debt. Further, analysts predict that their future cost of debt will be 4% and their cost of preferred stock is 11%. We also know that the current price of common stock is $26 and that the common stock is expected to pay a $2.50 dividend each year. The firm's tax rate is 38%. What is this firm's WACC?

7.06%

5.89%

9.62%

6.30%

None of these

2. Safi's Gluten-free bakery is thinking of buying a hybrid electric vehicle that will allow them to deliver fresh hot baked goods for $42,000. The vehicle is expected to save the company money in gas and earn an extra profit totaling $9,500 per year for 8 years. After that, the car will need to be replaced. Their current cost of capital is 5%. What is the profitability index of this project?

0.91

0.55

None of these options

1.46

1.81

Reference no: EM132062748

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