Like most firms in its industry, Yeastime Bakeries uses a subjective risk assessment tool of its own design. The tool is a simple index by which projects are ranked by level of perceived risk on a scale of 0-10. The scale is recreated in the following tabe

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The firm is analyzing two projects based on their RADRs. Project Sourdough requires an initial investment of $12,300 and is assigned a risk index of 6. Project Greek Salad requires an initial investment of $6,500 and is assigned a risk index of 10. The two projects have 6-year lives. Sourdough is projected to generate cash inflows of $5,800 per year. Greek Salad is projected to generate cash inflows of $3,700 per year. Use each project's RADR to select the better project.

Risk index 10 Required return 4.4% (current risk-free rate) 4.8 5.2 5.6 6.0 6.4 (current IRR) 6.8 7.2 7.6 8.0 8.4