Find the rate of return if the sprinkler system is installed

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Reference no: EM13985570

An office building and its equipment are insured to $7,100,000. The present annual insurance premium is $0.85 per $100 of coverage. A sprinkler system with an estimated life of 20 years and no salvage value can be installed for $180,000. Annual maintenance and operating cost is estimated to be $3,600. The premium will be reduced to $0.40 per $100 coverage if the sprinkler system is installed.

a. Find the rate of return if the sprinkler system is installed.

b. With interest at 12%, find the payout period for the sprinkler system.

Reference no: EM13985570

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