
91Economics of Energy Generation and Conservation Systems
Example 2.3
Suppose that the investor of Example 2.2 is a private company in the 34% federal income
bracket but pays no state income tax. The initial investment is $10,000, O&M is $1,300
per year in current dollars in year zero with an ination rate of 3%, and the nominal dis-
count rate is 12%. The investor uses a “5 year double-declining depreciation schedule”
as shown in column 4, and there is no salvage value. The results are shown for each of
the steps for evaluating the after-tax TLCC (Table 2.4).
*2.7 Internal Rate of Return
The internal rate of return (IRR) analysis is a conveni