Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his divisions return on investment (ROI), which has exceeded 19% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

	Product A	Product B
Initial investment:
Cost of equipment (zero salvage value)	$ 180,000	$ 390,000
Annual revenues and costs:
Sales revenues	$ 270,000	$ 360,000
Variable expenses	$ 130,000	$ 180,000
Depreciation expense	$ 44,000	$ 86,000
Fixed out-of-pocket operating costs	$ 80,000	$ 60,000

The companys discount rate is 16%.

3. Calculate the internal rate of return for each product.