What the net present value of the new tank is

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Pooh's Corner is a not for profit day care centre run by the parents. The centre uses tank water as it is not on the mains water. The tank water became contaminated as a number of birds died in the tank. Currently the centre is purchasing large water containers delivered weekly to provide drinking and washing water. The management committee is considering building a lager more modern water storage tank. The committee estimate that this will cost $22,500 and save the centre $3,500 annually for 10 years. The centre's required rate of return is 8 per cent. Income tax is not relevant.

Problem 1: The net present value of the new tank is:

Option 1: $28,205

Option 2: -$14,944

Option 3: $1,985

Option 4: $985

Reference no: EM132698042

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