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X Company is thinking about expanding the production of Product A and eliminating Product B....

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Accounting

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 $9,000 per year for the next 6 years, but will require the purchase of some additional equipment, costing $20,000. This equipment should be worth $4,000 at the end of 6 years.

By eliminating Product B, the firm will lose the product's $5,000 annual contribution margin but will save $10,000 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?

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