Eddie's Precision Machine Shop is insured for $700,000. The current annual insurance premium is $1.00 for every $100 of coverage. A sprinkler system with an estimated useful life of 20 years and no salvage value can be installed for $75,000. Annual maintenance costs for the sprinkler system are $1,700. If the sprinkler system is installed, the system must be included in the shop value for insurance purposes, but the insurance premium will be reduced to $0.40 for every $100 of coverage. Eddie uses a MARR of 15%/yr.

 Required

1) What is the annual value of this investment?

2) Is the filter economically justified?

Answer rating: 100% (QA)

1 To find the annual value of the sprinkler system we need to calculate the net annual cost and then ... View the full answer