Question

2. Sony Corporation has invested $5.6 million in developing super-thin TVs based on new, organic light-emitting diode technology. The company plans to produce 24,000 units each year for the next five years. The annual production and operating cost is estimated at $350 per unit and will be sold at $400 per unit. Use the internal rate of return method to determine if this investment is worthwhile, assuming the MARR is 5%. (25 points)

Answer 1

A В C 206 Year Cash flows 0 (5,600,000) 1$1,200,000 2 1,200,000 3 1,200,000 4 S 1,200,000 5 1,200,000 24000*(400-350) 207 208 209 210 211 212 213 2.34%IRR(B207:B212) 214 IRR

Function Arguments ? X IRR Values B207:B212 {-5600000;120000o0;1200000;1200000;1200000;120 number Guess 0.023447321 Returns the internal rate of return for a series of cash flows Guess is a number that you guess is close to the result of IRR; 0.1 (10 percent) if omitted. Formula result = 2.34% Help on this function Cancel OK

Here, IRR<MARR so investment is not worthwhile

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