On July 13, 2001, at 0428 central daylight time, a Boeing B-727-100, N189FE, registered to Federal Express Corporation, experienced a number 3, engine failure and fire during takeoff at the Memphis International Airport in Memphis, Tennessee. The airplane was operated by the Federal Express Corporation under the provisions of Title 14 CFR Part 121, and instrument flight rules. Visual meteorological conditions prevailed and a company IFR Flight plan was filed for the flight to Indianapolis, Indiana. The airline transport pilot, co-pilot and flight engineer were not injured, and the airplane sustained minor damage to the # 3 engine. The flight was originating from Memphis, Tennessee, at the time of the incident. According to Federal Express the flight had a normal start and taxi to runway 36R. The crew accomplished a normal takeoff using standard power. At 100 feet above ground level (AGL) the #3 engine fire warning light with normal engine indications illuminated. The captain made the takeoff and gave control of the aircraft to the first officer after cleaning up the airplane. The first officer flew visual pattern to runway 36C while the captain and second officer accomplished the engine fire/severe damage checklist. During the procedure the #3 oil low pressure light came on and the #3 generator tripped off. Also, the #3 exhaust gas temperature (EGT) started to rise above the red line and fluctuate. The #3 engine was shut down in accordance with the engine fire/severe damage checklist. The fire warning light did not go out until the second fire bottle was used. An emergency was declared with the tower. The captain took control of the airplane at 1000 feet AGL and made the landing on runway 36C. They made a normal landing and taxied clear of the runway. Emergency crews inspected the airplane and observed no indication of fire. They subsequently did a normal taxi back to the gate and there was a normal shutdown. Examination of the engine found the starter impeller missing from the starter, however it was found in the engine cowling. The bottom of the lower left side of the engine was burned with holes in the combustion chamber fan duct, but there were no penetrations. The N1 rotor was free to rotate and the fan rotated concurrently with the low pressure turbine. There was no apparent damage to the first stage fan blades and fourth stage turbine blades. The combustion chamber fan duct had two holes and axial split as follows: There was a 4 1/2- inch long axial by 4-inch wide circumferential hole at the 8 o'clock, 18 1/2-inches from the front flange. There was a 6-inch long axial split at the 7 o'clock, 8 1/2-inches from the front flange. There was a 3-inch hole with the edge pedaled outward at the 6 o'clock, 20-inches from the forward flange. The acoustic material was visible in the holes and was intact. The starter turbine was missing from the starter assembly, but the turbine was recovered from the cowling. The turbine impeller was intact, except for one turbine impeller vane that was broken across the airfoil 1/4-inch above the hub. The fractured airfoil had an approximately 1/8-inch long section of the forward edge that was flat and the remainder of the fracture surface was at a 45 degree angle. All of the tips on the full length airfoils had rub marks with material displaced away from the direction of rotation. The starter shaft was separated 2 1/4-inchs from the impeller. The bearing was broken and rubbed flush to the shaft. The ignition exciter box brackets were burned and the box was hanging by the cable. The ignition exciter box was burned open. The engine was not disassembled.