The IRR is the discount rate that makes the net present value of the investment equal to 0.
This means -$5,000 + $3,000 / (1 + IRR) + $4,000 / (1 + IRR)2 = 0
One way to compute this problem is to use trial and error with the existing answer choices and choose the discount rate that makes the PV of the cash flows closest to 5,000.
$3,000 / (1.25) + $4,000 / (1.25)2 = 4,960.
Alternatively: CFO = -5,000; CF1 = 3,000; CF2 = 4,000; CPT → IRR = 24.3%.
