Payback Period

[worldwidewall]

Hi<?xml:namespace prefix = o ns = "urn:schemas-microsoft-comfficeffice" /><o></o>
<o></o>
I am looking for a formula to determine the payback period in years of purchasing a particular machine. This machine will replace an employee or two. I want to determine the payback period assuming an annual raise for the employees that would be replaced. In other words each year I will be saving a salary that would have increased had I not bought the machine and replaced the employee.<o></o>
<o></o>
Cell A1 = 2.5% (yearly raise percentage)<o></o>
Cell A2 = $50000 (yearly savings in the first year)<o></o>
Cell A3 = $326000 (Machine Cost)<o></o>
Cell A4 = Formula to determine the payback period in years<o></o>
<o></o>
I can do this by putting the increasing salaries in adjacent cells and then using linear interpolation but this is too clumsy. I know there is a formula that will work.<o></o>
<o></o>
Thanks<o></o>
<o></o>
Dave<o></o>
<o> </o>

 

[shg]

I think ...

=NPER(2.5%, -50000, 0, 326000) ~ 6.11

That assumes that the cost of money is zero, though.

 

[worldwidewall]

Thank you, that appears to work. I did not know about that function.

Dave

 

[shg]

You're welcome, Dave.