Exercise 12A-5 Basic Present Value Concepts [LO12-7]

The Atlantic Medical Clinic can purchase a new computer system that will save $5,000 annually in billing costs. The computer system will last for five years and have no salvage value.

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.

Required:

What is the maximum price (i.e., the price that exactly equals the present value of the annual savings in billing costs) that the Atlantic Medical Clinic should be willing to pay for the new computer system if the clinics required rate of return is: (Round your final answers to the nearest whole dollar amount.)