Question

A multinational engineering consulting firm that wants to provide resort accommodations to special clients is considering the purchase of a three-bedroom lodge in upper Montana that will cost $290,000. The property in that area is rapidly appreciating in value because people anxious to get away from urban developments are bidding up the prices. If the company spends an average of $750 per month for utilities and the investment increases at a rate of 0.75% per month, how long would it be before the company could sell the property for $100,000 more than it has invested in it?


The time it will take is .......months

Answer 1

Initial cost = $ 290,000

Increse in investment rate = 0.75% per month

Utility cost per month = $ 750

Now we can use trial and error method to solve for n

Let us assume n = 50 months

We get LHS = 511.81

It is not equal to RHS. Thus again assume n = 60 on solving LHS

Again it is not equal to RHS that is 520. But the value of n lies in between 50 to 60 months. We can determine it using linear interpolation technique as follows

n = 52.44 months.

Number of months = 52.44 months

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