Consider the following investment opportunity:

Initial cost at year 0 $15 million Annual revenues beginning at year 1 $20 million Annual operating costs exclusive of depreciation $13 million Expected life of investment 5 years Salvage value after taxes $ 0 Annual depreciation for tax purposes $ 3 million Tax rate 25%

What is the rate of return on this investment? Assuming the investor wants to earn at least 10 percent after corporate taxes, is this investment attractive? LO.1