Stanley Enterprises is acquiring Berkley, Inc. for $899,000. Berkley has agreed to accept annual payments of $210,000 at an interest rate of 7.5 percent. How many years will it take Stanley Enterprises to pay for this purchase?

Question

Quizplus · Accepted Answer

To find the number of years, we use the formula for the present value of an annuity: PV = PMT × [(1 - (1 + r)^-n) / r]. Here, PV = $899,000, PMT = $210,000, and r = 7.5% or 0.075. Solving for n gives approximately 5.35 years.

Stanley Enterprises Is Acquiring Berkley, Inc