Sun ltd. Proposed to invest in an industrial project consists of a building with initial cost of $2,500,000 and salvage value of $900,000 at the end of the project's economic life of 8 years, and equipment with initial cost of $1,200,000 and no salvage value. The firm could finance this equipment with bank loan to be repaid by eight equal payments at the end of each year, the interest rate of the loan is 10% compounded annually. Corporation tax is 30%, building and equipment are depreciated using double-declining-balance switching to straight line with half year convention (50% deduction at the first year) method. The net revenues of the project are $1,000,000 at year one decreasing by &50,000 annually thereafter. The asset has an estimated annual maintenance cost of $200,000.
Determine the real return on the invested capital if inflation was run at 5% annually over the life of the project? The minimum attractive rate of return on capital (MARR) is required to be 12%

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