An Indium-Gallium-Arsenide-Nitrogen alloy de­veloped at Sandia National Laboratory is said to have potential uses in electricity-generating solar cells. The new material is expected to have a lon­ger life, and it is believed to have a 40% efficiency rate, which is nearly twice that of standard silicon solar cells. The useful life of a telecommunications satellite could be extended from 10 to 15 years by using the new solar cells. What rate of return could be realized if an extra investment now of $950,000 would result in extra revenues of $450,000 in year 11, $500,000 in year 12, and amounts increasing by $50,000 per year through year 15?

What will be an ideal response?


0 = -950,000 + [450,000(P/A,i*,5) + 50,000(P/G,i*,5)](P/F,i*,10)

Solve for i* = 8.45% per year (spreadsheet)

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