Consider the following investment opportunity.

Initial cost: $850,000

Annual revenues: $500,000

Annual operating costs, exclusive of depreciation: $200,000

Expected life: 20 years

Salvage value after taxes: $40,000

Annual depreciation for tax purposes: $25,000

Tax rate: 34%

Assume the annual figures are unchanged for the expected life of the investment.

1. What is the rate of return on this investment?

2. Assuming the investor wants to earn at least 12 percent, is this investment an attractive one?

Please provide calculation details