Peter Wants to Buy a Computer Which He Expects to Save

Multiple Choice

Peter wants to buy a computer which he expects to save him $4,000 each year in bookkeeping costs. The computer will last for five years, and at the end of five years it will have no salvage value. If Peter's required rate of return is 12%, what is the maximum price Peter should be willing to pay for the computer now?

A) $20,000
B) $14,420
C) $11,340
D) $10,830