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Find the profitability index

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Mary Bighair is considering investing in a beauty salon that will cost her $18,000. The after-tax cash flows on the investment should be about $4,000 per year for the next 5 years. Her opportunity cost of capital is 10.2 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

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.

Reference no: EM132999922

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