A property could be sold today (year 0) to provide an after-tax cash flow from sale of $900,000. If sold next year (year 1), the property is expected to generate after-tax cash flow from operations of $25,000 and provide an after-tax cash flow of $950,000 from the sale at the end of year 1.

b. As an alternative, the owner can forgo the sale and instead improve the property by investing $80,000 in year 0. That will increase the annual after-tax cash flows from operations by $10,000 - from $25,000 to $35,000 per year. A sale at the end of year 3 will generate an additional $95,000 of incremental after-tax cash flows. What is the internal rate of return (IRR) on the incremental cash flows?