Exercise 14A-5 (Algo) Basic Present Value Concepts [LO14-7]

The Atlantic Medical Clinic can purchase a new computer system that will save $6,000 annually in billing costs. The computer system will last for seven years and have no salvage value.

Click here to view Exhibit 14B-1 and Exhibit 14B-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 clinic's required rate of return is: (Round your final answer to the nearest whole dollar amount.)

maximum price:

1. 7%=

2. 9%=