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 $342000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $40000 per year. The salvage value of the well is negligible. The simple payback period for this well is 9 years. If the MARR of the town is 10% per year and the life of the geothermal well is 25 years, what is the IRR for this project? Choose the closest answer below. A. The IRR for the project is 8.7% per year. B The IRR for the project is 12.1% per year. C. The IRR for the project is 10.9% per year. D. The IRR for the project is 11,3% 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 $342000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $40000 per year. The salvage value of the well is negligible. The simple payback period for this well is 9 years. If the MARR of the town is 10% per year and the life of the geothermal well is 25 years, what is the IRR for this project? Choose the closest answer below. A. The IRR for the project is 8.7% per year. B The IRR for the project is 12.1% per year. C. The IRR for the project is 10.9% per year. D. The IRR for the project is 11,3% per year.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 14P
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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 $342000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $40000 per year. The salvage value of the well is negligible. The simple payback period for this well is 9 years. If the MARR of the town is 10% per year and the life of the geothermal well is 25 years, what is the IRR for this project?
Choose the closest answer below.
A. The IRR for the project is 8.7% per year.
B The IRR for the project is 12.1% per year.
C. The IRR for the project is 10.9% per year.
D. The IRR for the project is 11,3% per year.
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