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The Atlantic Medical Clinic can purchase a new computer system that will save $4,000 annually in billing costs. The computer system will last for twelve

The Atlantic Medical Clinic can purchase a new computer system that will save $4,000 annually in billing costs. The computer system will last for twelve 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 clinics required rate of return is:(Round your final answer to the nearest whole dollar amount.)

Maximum Price1. Eight percent

2. Twelve percent

image text in transcribed
image text in transcribed
EXHIBIT 14B-1 Present Value of $1;((1+t))1 EXHIBIT 14B-2 Present Value of an Annuity of \$1 in Arrears: r1[1((t+r))21]

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