3) A certain warehouse is worth P700,000. The average value of the merchandise in the warehouse is P600,000. The annual insurance rate on the warehouse is 1% and the merchandise stored in the warehouse is 0.9%. A proposal for the installation of a fire sprinkler system is being considered. The system will cost P70,000 and will affect a savings of 50% in both insurance premiums. Annual maintenance cost is estimated to be P1,500 and annual taxes of P600 for the sprinkler system. The owners of the warehouse demand that the investment in such equipment be written-off within 10 years. Invested capital can be expected to earn a minimum retum of about 20%. Woulrd vour advice the installation? Use the following methods a) ROR b) PW

3) A certain warehouse is worth P700,000. The average value of the merchandise in the warehouse is P600,000. The annual insurance rate on the warehouse is 1% and the merchandise stored in the warehouse is 0.9%. A proposal for the installation of a fire sprinkler system is being considered. The system will cost P70,000 and will affect a savings of 50% in both insurance premiums. Annual maintenance cost is estimated to be P1,500 and annual taxes of P600 for the sprinkler system. The owners of the warehouse demand that the investment in such equipment be written-off within 10 years. Invested capital can be expected to earn a minimum retum of about 20%. Woulrd vour advice the installation? Use the following methods a) ROR b) PW

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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