Darnell Enterprises constructed an addition to its building at a cost of $70,000. Extra annual expenses are expected to be $1850, but extra income will be $14,000 per year. How long will it take for the company to recover its investment at an interest rate of 10% per year? Also, write the spreadsheet function that determines np.
What will be an ideal response?
0 = -70,000 + (14,000 – 1850)(P/A,10%,np)
(P/A,10%,np) = 5.76132
From the 10% interest rate table, np is very close to 9 years.
Spreadsheet function: = NPER(10%,12150,-70000) displays 9.006 years
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