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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text: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.
A. The IRR for the project is 10.4% per year.
B. The IRR for the project is 9.9% per year.
C. The IRR for the project is 11.2% per year.
D. The IRR for the project is 7.5% per year.
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