Green Bank is considering opening a new branch. Project A would involve opening a new branch in Penticton, and Project B would involve opening a new branch in Osoyoos.

	Project A		Project B
Initial cash outlay	$(1,500,000)		$(1,000,000)
Upgrades required in year 3	(200,000)		(350,000)
Future cash inflows:
Year 1	$ 500,000		$ -
Year 2	500,000		-
Year 3	500,000		400,000
Year 4	500,000		900,000
Year 5	500,000		900,000
Total cash inflows	$2,600,000		$ 2,200,000

The companys discount rate is 5%.

Required:

a) Compute the net present values for Projects A and B separately. (7 marks)

b) Compute the separate profitability indices for Projects A and B. Which project would you recommend for investment based on the profitability index results? (3 marks)