Question

The cost of a new machine is 5,40,000. In the first year, the value of machine depreciates by 20% and in subsequent years, the depreciation is 10%. Calculate the total depreciation in its value at the end of 3 years.

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Answer 1

Step-by-step explanation:

3,49,920 rupees

is the cost of machine at the end of first year

=4,32,000

the cost of machine after 2 yes from now=

which is equal to 3,49,920 rupees

It is given that

Present value = 500000

Reduced value = 364500

Rate of depreciation = 10% p.a.

Consider n years as the period

We know that

A/P = (1−r/100)

n

Substituting the values

364500/500000=(1−10/100)

n

By further calculation

(9/10)

n

=729/1000=(9/10)

3

So we get

n=3

Therefore, the period in which its value be reduced to 364500 is 3 years.