The factory capacity is 25,000 units per year, but demand is 40,000 units. You have an opportunity to buy equipment that will allow your company to meet the 40,000 unit annual demand. The equipment will only last 7 years and have no use or no value after that. The equipment costs $4,567,890 - plus 8.88% sales tax, 1.2% dealer fee, and $13,917 for title and license fees. The company will pay the equipment off interest free over the next 5 years. Annual payments will be equal and will include all taxes and fees. The current sales price is $199/unit and variable cost is $125/unit. The variable cost per unit will go down to $95/unit with the new equipment. The fixed costs of $960,000 per year will rise $300,000 with the cost of the new equipment. The contribution margin will increase $2 per year faster with the new equipment as compared with the old. Your cost of capital/investment threshold is 7.17%.