the total capital investment for a proposed chemical plant, which will produce $ 1 500 000 worth of goods per year, is estimated to be $ 1 million. It will be neccesary to do a considerable amount of research and development (R&D) work on the project before the final plant can be constructed, and management wishes to estimate the permissible research and development costs. It has been decided that the aftertax return from the plant should be sufficient to pay off total capital investment plus all research and development costs in 7 years. A return after taxes of at least 12 % of sales must be obtained. Because R&D is an expense and the company's income tax rate is 35 % of gross earnigs, only 65% of the funds spent on R&D must be recovered after taxes are paid. Under these conditions, what is the total amount the company can afford to pay for research and development?