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What is the net present value of expanding the production

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Question - X Company is thinking about expanding the production of Product A and eliminating Product B. Expanding sales of A should result in additional firm profits of $11,000 per year for the next 7 years,   but will require the purchase of some additional equipment, costing $16,000. This equipment should be worth $3,700 at the end of 7 years.

By eliminating Product B, the firm will lose the product's $4.000 annual contribution margin but will save $13,000 of annual fixed costs.

Assuming a discount rate of 4%, what is the net present value of expanding the production of Product A and eliminating Product B?

A: $25,676

B: $34,14

C: $45,418

D: $60,406

E: $80,340

F: $106,852

Reference no: EM132759884

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