Siddharth Srivastava, cofounder of Zip Delivery, a B2B bike delivery marketplace in India, is considering investing in a new promotion program to accelerate sales in a particular region.

The current revenue in the region is 400,000 and is expected to decline 8 percent per year, starting next year. Siddharth is considering a promotion program that costs half a million today and is expected to increase revenue to 600,000 for each of the next two years, followed by a decline of 30 percent per year.

a. Identify the relevant cash flows that should be evaluated when deciding on making the promotion investment. Ignore taxes and inflation.

b. Assuming a eight-year horizon, what is the IRR of the investment?