Acceleron is planning future expansion with a new facility in Indianapolis. The company will make the move when its real estate sinking fund has a total value of $1.2 million. If the fund currently has $400,000 and the company adds $50,000 per year, how many years will it take for the account to reach the desired value? The fund earns interest at a rate of 10% per year.

Question

Business

Drew Todd

10 February, 05:46

Acceleron is planning future expansion with a new facility in Indianapolis. The company will make the move when its real estate sinking fund has a total value of $1.2 million. If the fund currently has $400,000 and the company adds $50,000 per year, how many years will it take for the account to reach the desired value? The fund earns interest at a rate of 10% per year.

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Anderson Hunt · Answer 1

6.67 years

Explanation:

The number of years for the firm to reach the desired value of $1.2 million can determined using the nper formula in excel as below:

=nper (rate, pmt, pv,-fv)

rate is the interest rate earns by the fund at 10% per year

pmt is the addition to the fund in each year which is $50,000

pv is the current amount in the fund which is $400,000

fv is the desired value of $1.2 million

=nper (10%,50000,400000,-1200000) = 6.67 years

It would take 6.67 years for the sinking fund to reach the desired value of $1,200,000