Mobil Asphalt Paving Company has received two proposals for a new Asphalt Paving Machine. Information provided for each machine is as follows:

Big Boss Paver Perfect Paver

Model 700 Model 777

Capital investment $995,000 $575,000

Annual cash flows $170,000 $95,000

Estimated useful life 10 years 10 years

Mobil Company uses a discount rate of 9% to evaluate both projects.

Note: Factor for the Present Value of an Ordinary Annuity 10 years @9% = 6.41766

Please help with the following:

(a) Calculate the net present value of both projects.

(b) Calculate the profitability index for each project.

(c) Which project should Mobil accept?