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 divisions return on investment (ROI), which has exceeded 25% 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)	$ 340,000	$ 525,000
Annual revenues and costs:
Sales revenues	$ 380,000	$ 480,000
Variable expenses	$ 172,000	$ 225,000
Depreciation expense	$ 68,000	$ 105,000
Fixed out-of-pocket operating costs	$ 83,000	$ 66,000

The companys discount rate is 17%.

Calculate the net present value for each product.

Calculate the profitability index for each product.