RKE Associates is considering the purchase of a building it

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 $180,000, 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 18% per year? Solve by using the NPER function.

The company will recover its investment in  years.

Solution

Time period = n

PV = $160000

annual payments made (otherwise) = $30000

160000 = 30000/(1 + 18%) + .... + 30000/(1 + 18%)ⁿ

Solve for \'n\':

n = nper(18%,-30000,160000)

n = 19.45 years