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 effect 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 return of about 20%.

Would you advice the installation? (Use ROR and PW)