2. Gallatin, Inc., has assembled the estimates shown below relating to a proposed new project with a 5-year project life. At the end of the 5 years, the equipment purchased for the project would be sold and working capital would revert to other uses in the company. Gallatin uses a discount rate of 10%. (Ignore income taxes.) Annual cash sales Annual out-of-pocket cash expenses Annual depreciation on new equipment Initial cost of new equipment Salvage value of new equipment in 5 years Working capital requirement $ 450,000 $ 340,000 $ 66,000 $ 380,000 $ 50,000 $ 40,000 Use discount factors from Exhibit 12B-1 and Exhibit 12B-2, when showing your work. Required: Compute the net present value of the project. 3. Gallatin is using net present value to evaluate two investments, but only has the capital to fund one. The net present values of the investments are similar but the initial investments required are different, as shown below. Investment 1 Investment 2 Initial investment $125,000 $80,000 Net present value $ 22,000 $20,000 Compute the profitability index for each investment