Lucy bought a house that costs $200,000. Lucy will sell the house 3 years after purchase. Suppose the house price grows 10% annually (compounded annually). Buying costs are 5% of the purchase price of the house. Selling costs are 8% of the selling price of the house. Lucys income tax rates are 20% average and 25% marginal.

Lucy financed the purchase out of pocket (no mortgage). Lucys annual cost of ownership net of tax savings is exactly equal to the annual rent she would have paid to live in the same house.

Find the IRR of Lucys investment.