1. A factory machine was purchased for $45,000 and has an estimated lifetime of 8 years. If the scrap value (Resale) at the end of 8 years is estimated at $3000. (4 Marks) a. find the book value function V=f(t).
b. Find value of machine after 3.5 years and 7 years.
c. Sketch Book Value function.
Answers
Answer:
sorry I'll try next time
Given : A factory machine was purchased for $45,000 and has an estimated lifetime of 8 years. If the scrap value (Resale) at the end of 8 years is estimated at $3000.
To Find :
a. find the book value function V=f(t).
b. Find value of machine after 3.5 years and 7 years.
c. Sketch Book Value function.
Solution:
Initial Value = 45000
Final Value = 3000
rate of depreciation = r
t = Time period = 8 years
A = P ( 1 - r/100)^t ( -ve sign shows depreciation )
=> 3000 = 45000 (1 - r/100)⁸
=> 1/15 = (1 - r/100)⁸
=> 0.712834 = 1 - r/100
=> r = 28.71657 %
V = f(t) = 45000 (0.712834)^t
Substitute value of t :
Value after 3.5 years = 13,761.7
Value after 7 years = 4,208.5
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