Chapter 12.A, Problem 5E

Basic Present Value Concepts
The Atlantic Medical Clinic can purchase a new computer system that will saw $7000 annually in billing costs. The computer system will last for eight wars and have no salvage value.
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 toy for the new computer system if the clinic’s required rate of return is:
1. Sixteen percent?
2. Twenty percent?