Question

QUESTION 2 Wyoming wants to drill a geothermal well to provide district heating steam and hot water for its businesses and residences. After government subsides, the capital investment for the well is $1,400,000. Assuming end-of-year annual dollars savings in steam and hot water equal to 6 % of the investment cost of the well, and assuming the residual value of the well after 68 years is zero, determine the internal rate of return (as a percent) for this situation. The MARR of the town is 3% per year (Enter your answer as a A town in number without the % sign.) 20 points Save Answer

Answer 1

IRR is 5.88.
Here excel formula of IRR is used as shown below.

Here Intial cash outflow is $1,400,000
Annual cash inflow is $1,400,000 *6% = $84,000