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

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Accounting

X Company is thinking about expanding the production of Product X and eliminating Product Y. Expanding sales of X should result in additional firm profits of $11,000 per year for the next 8 years, but will require the purchase of some additional equipment, costing $18,000. This equipment should be worth $3,600 at the end of 8 years.

By eliminating Product Y, the firm will lose the product's $6,000 annual contribution margin but will save $10,000 of annual fixed costs.

Assuming a discount rate of 7%, what is the net present value of expanding the production of Product X and eliminating Product Y?

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