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What is the net present value of expanding the production

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Problem 1: X Company is thinking about expanding the production of Product A and eliminating Product B. Expanding sales of A should result in additional ?rm pro?ts of $10,000 per year for the next 8 years, but will require the purchase of some additional equipment, costing $16,000. This equipment should be worth $3,700 at the end of 8 years. By eliminating Product B, the ?rm will lose the product's $6,000 annual contribution margin but will save $13,000 of annual fixed costs. Assuming a discount rate of 5%, what is the net present value of expanding the production of Product A and eliminating Product B?

Reference no: EM132783323

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