What is the internal rate of return

Reference no: EM132148844

Question: A renewable energy system is being evaluated by an office building, its initial cost is $25,850. This system is estimated to provide energy savings equivalent to a cut-off of $5,250 from the annual electricity bill. Annual operation and maintenance costs are estimated to be just $830. This system has a useful life of 10 years with no salvage value.

1. What is the Internal Rate of Return (IRR) of this renewable energy system ?

If you know that the building owner can sell electricity to the grid during weekends and holidays scoring a reinvestment rate of 10%.

2. What is the Adjusted Internal Rate of Return (AIRR) for this renewable energy system ?

3. If you know that the building owner uses a MARR equals to 12%, would you recommend he uses that energy system?

Reference no: EM132148844

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