**Answer:**

**$115,849.581
**

**Explanation:**

For computing the net present value first we have to do following calculations

**Annual depreciation expense is **

= (Cost - Salvage value) ÷ Useful life

= ($2.31 million ÷ 3)

= $770,000

Now

Annual Operating cash flow = (Sales - Costs) × (1 - tax rate) + Tax savings on Annual depreciation

= ($1,785,000 - $695,000) × (1 - 0.25) + (0.25 × $770,000)

= $817,500 + $192,500

= $1,010,000

**Now Present value of annuity is **

**= Annuity × [1 - (1 + interest rate)^ -time period] ÷ rate **

= $1,010,000 × {1 - (1.12)^-3] ÷ 0.12

= $1,010,000 × 2.401831268

= $2,425,849.581

So, Net present value is

= Present value of inflows - Present value of outflows

= $2,425,849.581 - $2,310,000

= $115,849.581