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?
160,000 = 30,000(P/A,15%,n)
(P/A,15%,n) = 5.3333
From 15% table, n is between 11 and 12 years; therefore, n = 12 years
By NPER, n = 11.5 years
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