A certain warehouse is worth Php 1,650,000. The average value of the merchandise in the warehouse is Php 1,500,000. 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 is being considered. The system will cost Php 80,000 and will effect a savings of 70% in both insurance premiums. Monthly maintenance is estimated to be Php 500 and annual taxes is Php 4,000 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 minimum return of about 17%. Would you advice the installation? (Use ROR)

A certain warehouse is worth Php 1,650,000. The average value of the merchandise in the warehouse is Php 1,500,000. 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 is being considered. The system will cost Php 80,000 and will effect a savings of 70% in both insurance premiums. Monthly maintenance is estimated to be Php 500 and annual taxes is Php 4,000 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 minimum return of about 17%. Would you advice the installation? (Use ROR)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A certain warehouse is worth Php 1,650,000. The average value of the merchandise in the warehouse is Php 1,500,000.
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 is being considered. The system will cost Php 80,000 and will effect a savings of
70% in both insurance premiums. Monthly maintenance is estimated to be Php 500 and annual taxes is Php 4,000 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 minimum return of about 17%. Would you advice the
installation? (Use ROR)

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A certain warehouse is worth Php 1,650,000. The average value of the merchandise in the warehouse is Php 1,500,000. 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 is being considered. The system will cost Php 80,000 and will effect a savings of 70% in both insurance premiums. Monthly maintenance is estimated to be Php 500 and annual taxes is Php 4,000 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 minimum return of about 17%. Would you advice the installation? (Use ROR)
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