You have been given the following information on a project:

It has a five-year lifetime

The initial investment in the project will be $25 million, and the investment will be depreciated straight line, down to a salvage value of $10 million at the end of the fifth year.

The revenues are expected to be $20 million next year and to grow 10% a year after that for the remaining four years.

The cost of goods sold, excluding depreciation, is expected to be 50% of revenues.

The tax rate is 40%.

1. Estimate the pretax return on capital, by year and on average, for the project.

2. Estimate the after-tax return on capital, by year and on average, for the project.

3. If the firm faced a cost of capital of 12%, should it take this project?