Question: A risk manager was asked to determine whether the installation of a new sprinkler system at the corporate headquarters building would be justified. The cost

A risk manager was asked to determine whether the installation of a new sprinkler system at the corporate headquarters building would be justified. The cost of the project would be $40,000. She estimates the project would provide an after-tax net cash flow of $25,000 per year for six years, with the first of these cash flows coming one year after the investment in the project.

What is the net present value (NPV) of the sprinkler system project, assuming a rate of return required by investors is 9 percent?

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