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 $8,000 per year for the next 7 years, but will require the purchase of some additional equipment, costing $19,000. This equipment should be worth $4,000 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 $12,000 of annual fixed costs. Assuming a discount rate of 7%, what is the net present value of expanding the production of Product A and eliminating Product B? Table 1: Present Value of $1.00 6% 8% 9% Period 4% 1% 2% 1 0.962 2 3 4 0.980 0.961 0.942 0.924 0.906 5 6 0.888 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 7 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 10% 11% 12% 13% 14% 15% 0.909 0.901 0.893 0.885 0.877 0.870 0.826 0.812 0.797 0.783 0.769 0.756 0.751 0.731 0.712 0.693 0.675 0.658 0.683 0.659 0.636 0.613 0.592 0.572 0.621 0.593 0.567 0.543 0.519 0.497 0.564 0.535 0.507 0.480 0.456 0.432 0.513 0.482 0.452 0.423 0.400 0.376 0.467 0.434 0.404 0.376 0.351 0.327 0.424 0.391 0.361 0.333 0.308 0.284 0.386 0.352 0.322 0.295 0.270 0.247 0.350 0.317 0.287 0.261 0.237 0.215 0.319 0.257 0.231 0.208 0.187 0.290 0.258 0.229 0,204 0.182 0.163 0.263 0.232 0.205 0.181 0.160 0.141 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 8 9 10 11 0.650 0.286 12 13 0.625 0.601 0.577 14 Table 2: Present Value of an Annuity of $1.00 2% 4% 8% 9% Period 1% 1 0.990 2 1.970 3 2.941 4 3.902 5 4.853 6 5.795 7 6.728 8 7.652 9 8.566 10 9.471 11 10.368 12 11.255 13 12.134 14 13.004 3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 5% 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 4.868 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 10% 11% 12% 13% 14% 15% 0.909 0.901 0.893 0.885 0.877 0.870 1.736 1.713 1.690 1.668 1.647 1.626 2.487 2.444 2.402 2.361 2.322 2.283 3.170 3.102 3.037 2.974 2.914 2.855 3.791 3.696 3.605 3.517 3.433 3.352 4.355 4.231 4.111 3.998 3.889 3.784 4.712 4.564 4.423 4.288 4.160 5.335 5.146 4.968 4.799 4.639 4.487 5.759 5.537 5.3285.132 4.946 4.772 6.145 5.889 5.650 5.426 5.216 5.019 6.495 6.207 5.938 5.687 5.453 5.234 6.814 6.492 6.194 5.918 5.660 5.421 7.103 6.750 6.424 6.122 5.842 5.583 7.367 6.982 6.628 6.302 6.002 5.724 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 7.360 7.887 8.384 8.853 9.295 11.296