Question

The Atlantic Medical Clinic can purchase a new computer system that will save $3,000 annually in billing costs. The computer system will last for six years and have no salvage value. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: Up to how much should the Atlantic Medical Clinic be willing to pay for the new computer system if the clinic’s required rate of return is: 1- Ten percent 2- Twelve percent

Answer 1

Statement showing Cash flows
Particulars	Time	PVF 10%	Amount	PV
Cash flows	1.00	0.9091	3,000.00	2,727.27
Cash flows	2.00	0.8264	3,000.00	2,479.34
Cash flows	3.00	0.7513	3,000.00	2,253.94
Cash flows	4.00	0.6830	3,000.00	2,049.04
Cash flows	5.00	0.6209	3,000.00	1,862.76
Cash flows	6.00	0.5645	3,000.00	1,693.42
Atlantic Medical Clinic would be willing to pay				13,065.78
Statement showing Cash flows
Particulars	Time	PVF 12%	Amount	PV
Cash flows	1.00	0.8929	3,000.00	2,678.57
Cash flows	2.00	0.7972	3,000.00	2,391.58
Cash flows	3.00	0.7118	3,000.00	2,135.34
Cash flows	4.00	0.6355	3,000.00	1,906.55
Cash flows	5.00	0.5674	3,000.00	1,702.28
Cash flows	6.00	0.5066	3,000.00	1,519.89
Atlantic Medical Clinic would be willing to pay				12,334.22