RKE & Associates is considering the purchase of a building it currently leases for $30,000 per year. The owner of the building put it up for sale at a price of $170,000, but because the firm has been a good tenant, the owner offered to sell it to RKE for a cash price of $160,000 now. If purchased now, how long will it be before the company recovers its investment at an interest rate of 15% per year? Solve by spreadsheet function or factor.
What will be an ideal response?
400,000 = 320,000 + 50,000(A/G,i,5)
(A/G,i,5) = 1.6000
Interpolate between i = 22% and i = 24%
i = 22.6%
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