What is the annual worth of this investment

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Eddie’s Precision Machine Shop is insured for $700,000. The present yearly insurance premium is $1.00 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $50,000. Annual maintenance costs for the sprinkler system are $3,700. If the sprinkler system is installed, the system must be included in the shop’s value for insurance purposes, but the insurance premium will reduce to $0.40 per $100 of coverage. Eddie uses a MARR of 15%/year. a. What is the annual worth of this investment? b. Is the filter economically justified?

Reference no: EM13886602

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