The Owner of a Number of Gas Stations Is Considering

Multiple Choice

The owner of a number of gas stations is considering installing coffee machines in his gas stations. It will cost $260,000 to install the coffee machines, and they are expected to boost cash flows by $111,428 per year for their five-year working life. What must the cost of capital be if this investment has a profitability index of 1?

A) 1.17%
B) 2.34%
C) 4.69%
D) 5.86%