Shimano Company has an opportunity to manufacture and sell one of two new products for a five-year period. The companys tax rate is 30% and its after-tax cost of capital is 14%. The cost and revenue estimates for each product are as follows:

	Product A			Product B
Initial investment in equipment	$	400,000		$	550,000
Initial investment in working capital	$	85,000		$	60,000
Annual sales	$	370,000		$	390,000
Annual cash operating expenses	$	200,000		$	170,000
Cost of repairs needed in three years	$	45,000		$	70,000

The equipment pertaining to both products has a useful life of five years and no salvage value. The company uses the straight-line depreciation method for financial reporting and tax purposes. At the end of five years, each products working capital will be released for investment elsewhere within the company.

Required:

1.	What is the net present value of each investment opportunity? (Round discount factor(s) to 3 decimal places. Round your intermediate calculations and answers to nearest whole dollar.)

2.

Which of the two products should the company pursue based on profitability index?

	Product A
	Product B