For a new product an initial investment of 500000 is

Question

For a new product, an initial investment of $500,000 is required. The revenues and costs for each of the four years of the product’s life are

                Year       Sales Revenue Costs

                1              $100,000              $100,000

                2              $200,000              $150,000

                3              $300,000              $100,000

                4              $500,000              $150,000

The expected residual value of the equipment is 10% of its first cost of $500,000 at the end of the five years. Determine the IRR of the investment.