1. The following are the cash flows of two projects: Year Project A Project B 0 −$ 290 −$ 290 1 170 190 2 170 190 3 170 190 4 170 If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
2. Trahern Baking Co. common stock sells for $32.25 per share. It expects to earn $3.75 per share during the current year, its expected dividend payout ratio is 65%, and its expected constant dividend growth rate is 7.0%. New stock can be sold to the public at the current price, but a flotation cost of 4.5% would be incurred. What would be the cost of equity from new common stock?