Like most firms in its industry, Culinary Caf uses a subjective risk assessment tool of its own design. The tool is a simple index b which projects are ranked by level of perceived risk on a scale of 0 to 10. The scales is re-created in the following table.

Risk indexrequired return

04.0% (current risk-free rate)

1 4.5

25.0

35.5

46.0

56.5 (current IRR)

67.0

77.5

88.0

98.5

109.0

The firm is analyzing tow projects based on their RADRs. Project Pita requires and initial investment of $12,500 and is assigned a risk index of 6. Project Grape leaf requires an initial investment of $7,500 and is assigned a risk index of 8. The two projects have a 7-year lives. Pita is projected to generate cash inflows of $5500 per year. Grape leaf is projected to generate cash inflows of $4000 per year. Use each projects RADR to select the better project.-