Answer to #3 is NOT 1.07 and 1.06

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 24% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment Cost of equipment (zero salvage value) $320,000 S515,000 Annual revenues and costs: Sales revenues S370,000 S470,000 Variable expenses $ 168,000 S218,000 Depreciation expense $ 64,000 S 103,000 Fixed out-of-pocket operating costs $ 82,000 $ 62,000 The company's discount rate is 22%. 3. Calculate the project profitability index for each product. (Round your answers to 2 decimal places.) Product A Product B 0.93 0.95 Project profitability index