A town in Wyoming wants to drill a geo-thermal well to provide district heating steam and hot

Question:

A town in Wyoming wants to drill a geo-thermal well to provide district heating steam and hot water for its businesses and residences. After government subsidies, the capital investment for the well is $500,000, and the geothermal well will reduce natural gas consumption for steam and hot water production by $50,000 per year. The of the well is negligible. The simple for this well is 10 years. If the of the town is 8% 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) 6.2%
(b) 9.1%
(c) 8.8%
(d) 10.3%
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...