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 \(\$ 20,000\). Annual maintenance costs for the sprinkler system are \(\$ 400\). 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 percent/year.

a. What is the present worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on present worth?

c. Is the sprinkler system economically justified?