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.

The net present value of the new tank is:

$28,205

-$14,944

$1,985

$985