Jack and Jill’s Place is a nonprofit nursery school run by the parents of the enrolled children. Since the school is out of town, it has a well rather than a city water supply. Lately, the well has become unreliable, and the school has had to bring in bottled drinking water. The school’s governing board is considering drilling a new well (at the top of the hill, naturally). The board estimates that a new well would cost $2,900 and save the school $530 annually for 10 years. The school’s hurdle rate is 8 percent. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)

Required: Compute the new well’s net present value. Should the governing board approve the new well? (Round your final answer to the nearest dollar amount.)

Answer rating: 100% (QA)

Cost of new well 2900 Annual savings from new well 5... View the full answer