A logistics company is assessing two warehouse expansion projects. Details are as follows:

• Expansion A:

• Initial Investment: $700,000
• Cost of Capital: 8%
• Additional Cash Flows: $200,000 annually for 5 years

• Expansion B:

• Initial Investment: $750,000
• Cost of Capital: 7%
• Additional Cash Flows: $210,000 annually for 5 years

Requirements:

1. Compute the payback period for each expansion.
2. Calculate the NPV for each expansion.
3. Calculate the profitability index for each expansion.
4. Provide a recommendation on which expansion to choose and explain why.