Uni-Focus Limited is considering whether to invest $82,000 in Project A or Project B.The following information is available for both projects:

Project A

Project B

Cost of equipment needed today

$82,000

Working capital requirement

$82,000

Annual cash operating inflows

$12,000

$27,000

Salvage value in 3 years

$8,000

Uni-Focus Limited requires a rate of return of 10% on its capital projects.

Both projects will last 3 years.If Uni-Focus Limited selects Project A, the working capital investment will be released at the end of the 3-year period.

Required:

1. Calculate the net present value of each project.
2. Which project would you pick based on your net present value calculation?
3. Calculate the profitability index for Projects A and B.