The risk management system for loss control that is being evaluated is for a chemistry lab safety shower call back alarm. The equipment and its installation are estimated to cost $400,000. The useful life is 14 years without any salvage value at the end of the useful life. Insurance premium reductions of $50,000 per year have been negotiated. Loss reduction is expected to amount to a savings of at least $75,000 per year. The alarm connection has an annual fee of $1500 associated with the system. Maintenance of the shower alarm call back is expected to be $1,000 during the first 7 years of the systems useful life and $1500 for the remaining 7 years. The chemical research and development company are in the 35% corporate tax rate. The cost of capital (or appropriate discount rate) for this project is 10%. What is the NPV of the project. Would you accept or reject this project. Justify your answer.
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