The initial cost of a proposed heat recovery system is $375,000. The annual operation and maintenance costs are projected to be $12,000. The salvage value of the system at the end of its useful life (projected to be 30 years) is $60,000. The annual savings in fuel costs resulting from this system are estimated to be $55,000 per year

a. Assuming annual compounding, determine the rate of return for this heat recovery system.

b. If management has set the MARR to be 15% for a heat recovery system like this, what is the maximum initial cost that can be spent on the system (assuming that all other costs and incomes are the same)?