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 19% 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) $190,000 $400,000 Annual revenues and costs: Sales revenues $270,000 $ 370,000 Variable expenses $128,000 $ 178,000 Depreciation expense $ 38,000 $ 80,000 Fixed out-of-pocket operating costs $ 72,000 $ 52,000 The company's discount rate is 17%. 3. Calculate the project profitability index for each product. (Use the appropriate table to determine the discount factor(s). Round your answers to 2 decimal places.) Product A Product B 1.18 1.12 Project profitability index 4. Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and use the appropriate table to determine the discount factor(s).) Product A 17.9% Product B 15.5% Simple rate of return