Exercise 11A-5 Basic Present Value Concepts [LO11-5]

The Atlantic Medical Clinic can purchase a new computer system that will save $8,000 annually in billing costs. The computer system will last for seven years and have no salvage value.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

Up to how much should the Atlantic Medical Clinic be willing to pay for the new computer system if the clinics required rate of return is: (Use the appropriate table to determine the discount factor(s).)