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Green Manufacturing is considering to invest a sprinkler system which costs $150,000. The sprinkler system is...

  1. Green Manufacturing is considering to invest a sprinkler system which costs $150,000. The sprinkler system is assumed to last 5 years. (Note: it should last longer. The reason for the assumption is for calculation simplicity.) The net cash flows associated with the sprinkler system (e.g., loss reduction, premium savings, and costs of upkeep) is $50,000 per year for 5 years.    The tax rate is 20% and opportunity cost is 10%.
  1. Show the cash flows associated with the new sprinkler system
  2. What is the NPV of the sprinkler system?
  3. Should Green Manufacturing invest the system? Why?

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Expert Solution

jeff jeffy answered 2 years ago
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