1. Mary Bighair is considering investing in a beauty salon that will cost her $17,000. The...

1. Mary Bighair is considering investing in a beauty salon that will cost her $17,000. The after-tax cash flows on the investment should be about $5,000 per year for the next 7 years. Her opportunity cost of capital is 11.2 percent. Find the Profitability Index (PI) of buying the beauty salon: (Do not round intermediate calculations; round final answer to four decimals, i.e. 123.4567)

2. Based on the Profitability Index (PI) results you obtained in the previous question, is the beauty salon a good investment? Why or why not? Explain fully.

Expert Solution

jeff jeffy answered 2 years ago

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