$7-20.$ The Hitech Engineering Company is considering

the purchase of a flow measuring device. Its purchase

price is $$12,000$ and another $$600$ will be spent shipping

and installing this device. Use of the device is expected

to result in a $$8,000$ annual increase in revenue, and

operating expenses are estimated to be $$3,000$ per year.

The meter will be used for five years, and then it will be

sold for an estimated market value of $$3,000.$ The meter$$s

MACRS property class is five years.

Determine the after$-$tax IRR on this investment, if

the effective income tax rate $($t$)$ is $40\%.$ If after$-$tax MRR

is $10\%,$ should a flow measuring device be purchased,

installed and utilized by the company? What is the

payback period based on after$-$tax cash flows? $(7\mathrm{.}10)$