A town in Wyoming wants to drill a geothermal well to provide district heating steam and hot water for its businesses and residences. After government subsidies, the capital investment for the well is $380,000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $40,000 per year. The salvage value of the well is negligible. The simple payback period for this well is 10 years. If the MARR of the town is 5% per year and the life of the geothermal well is 30 years, what is the IRR for this project? Choose the closest answer below. O A. The IRR for the project is 10.4% per year. O B. The IRR for the project is 9.9% per year. OC. The IRR for the project is 11.2% per year. O D. The IRR for the project is 7.5% per year.

A town in Wyoming wants to drill a geothermal well to provide district heating steam and hot water for its businesses and residences. After government subsidies, the capital investment for the well is $380,000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $40,000 per year. The salvage value of the well is negligible. The simple payback period for this well is 10 years. If the MARR of the town is 5% per year and the life of the geothermal well is 30 years, what is the IRR for this project? Choose the closest answer below. O A. The IRR for the project is 10.4% per year. O B. The IRR for the project is 9.9% per year. OC. The IRR for the project is 11.2% per year. O D. The IRR for the project is 7.5% per year.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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