The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billing costs. The computer systemwill last for nine 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 (l.e., the price that exactly equals the present value of the annual savings in billing costs) Atlantic MedicalClinic should be willing to pay for the new computer system if the clinic's required rate of return is:Note: Round your final answer to the nearest whole dollar amount.Maximum Price1. Seven percent2. Eleven percent

To determine the maximum price Atlantic Medical Clinic should be willing to pay for the new computer…

Answered: The Atlantic Medical Clinic can…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billingcosts. The computer system will last for eight years and have no salvage value.Required:Up to how much should the Atlantic Medical Clinic be willing to pay for the new computer system if theclinic’s required rate of return is:1. Sixteen percent?2. Twenty percent?
The hospital is considering the purchase of imaging equipment worth $25,000 to improve its visual capture results, and improve outcomes. The operating costs will be reduced by $7,000 per year. The computer has an estimated life expectancy of 5 years, and an estimated salvage value of $5,000. What is the profitability index if the discount rate is 8%. Ignore reimbursement considerations.
Use Annual Worth method to calculate the benefit/cost ratio at i = 6% for a new library. The first cost is $500K, and O&M costs are $100K per year. There is no salvage value after 30 years. Community benefits are estimated to be $130K per year. Is the library economically justified? Write a brief interpretation of your answer
Suppose a theater organization is going to purchase new sound equipment for its auditorium. Option A has a net present cost of $40,000 and a useful life of 6 years; Option B has a net present cost of $35,000 and a useful life of 5 years. Both options involve annual maintenance costs which are included in their respective net present costs. If the organization uses a discount rate of 3.5%, it should purchase:
New Tech Corporation is a rapidly growing biotech company that has a required rate of return of 10%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete. The building contractor offered. New Tech a choice of three payment plans, as follows:.1. Using the net present value method, calculate the comparative cost of each of the three payment plans being considered by New Tech.(Round your final answers to the nearest whole dollar.) The net present value cost of Plan I is .The net present value cost of Plan II isThe net present value cost of Plan III is 2. Which payment plan should New Tech choose? Explain. 3. Discuss the financial factors, other than the cost of the plan, and the nonfinancial factors that should be considered in selecting an appropriate payment plan More info • Plan I: Payment of $225,000 at the time of signing the contract and $4,800,000 upon completion of the building. The end of the second year is the completion…
Your landlord is planning to renovate the pool in your apartment. The New pool will cost 152,895 dollars, which will add money to you rent but will increase the revenue for your landlord by 54,500 at year 4 and 87325 at years 10. He calculates that the operational cost will be 13250. The poll has a salvage value of 68,560 after 8 years. a) At a discount rate of 12.45% find the present value of this plan b) draw a cash flow diagram and show if your land lord's plan is viable or not
A hospital just purchased upgraded software for the Electronic Medical Record surgical dashboard. The additional surgical dashboard application costs $4,000 now, and will require additional annual payments in years 2 through 8, with new monitors that will cost $10,000 in year 3 and Use an interest rate of 12%, compounded annually. What is the present worth in year 0 of the payments and costs if the interest rate is 12% per year?
The management of Kunkel Company is considering the purchase of a $27,000 machine that would reduce operating costs by $6,500 per year. At the end of the machine’s five-year useful life, it will have zero salvage value. The company’s required rate of return is 13%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine?
The Ham and Egg Restaurant is considering an investment in a new oven that has a cost of $60,000, with annual net cash flows of $9,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether or not you would recommend that Ham and Egg invest in this oven.
An auto repair company needs a new machine that will check for defective sensors. The machine has an Initial investment of $224,000. Incremental revenues, including cost savings, are $120,000, and Incremental expenses, including depreciation, are $50,000. There is no salvage value. What is the accounting rate of return (ARR)?

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