Question

a machine cost a company nu. 80000 and its effective life is estimated to be 15 years. A sinking fund is created for replacing the machine by a new model at the end of its life, when its scrap realizes a sum of nu. 8000 only. The price of new model is estimated to be 20% higher then the price of the present one. find what amount should be set aside at the end of each year, out of the profit, for the sinking fund, if the fund earns interest at 7% compounded annually.

Answer 1

Answer:

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Answer 2

Answer:

The amount should be set aside at the end of each year is 3500.

Step-by-step explanation:

• The Cost of machine=80000
• Time=15 years
• The Scrap Value of the machine after 15 years =8000
• Price of the new model of the machine= $80000+0.2\times80000=96000$
• Rate of the interest =7 %  compounded anually
• Amount to be collected after 15 years=96000-8000=88000
• The amount is given by

     $88000=\frac{A}{0.07}((1+0.07)^{15}-1)\\ 6160=A(2.759-1)\\A=3500$

The amount at the end of each year for the 15 years is 3500 rupees.

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