A company is investigating the possibility of building

a distributed generation (DG) plant with an initial

investment cost of $400,000 that will save $60,000 a

year in lost production and reduced energy cost. This

DG plant has an anticipated life of 20 years and

requires an overhaul every 10 years of operation

costing $30,000. Conduct a thorough analysis (both

Present Value and IRR) to determine whether the

investment is a wise one or not. The cost of capital is

15% and salvage value of the plant at the end of the

year 20 is $40,000.

1. Is this a wise investment?

2.Explain?

3.At what MARR does this

project look attractive or does

this project never look

attractive?