3. An engineer is working on the layout of a new research and experimentation facility. Two plant
operators will be required. If, however, an additional $150,000 of instrumentation and remote controls
were added, the plant could be run by a single operator. The total before-tax cost of each plant
operator is projected to be $52,500 per year. The instrumentation and controls will be depreciated
using the MACRS 5-year depreciation schedule. The research facility will be used for five years then
discontinued, with no residual value on the equipment.
(a) Find the rate of return on the project, and the after tax payback period.
(b) Based on a MARR of 20%, is this a desirable investment?