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Question
A manufacturer reckons that the value of a machine, which costs him Rs 15625, will depreciate each year by 20%. Find the estimated value at the end of 5 years.
Solution
Cost of machine = Rs. 15625
It will depreciate each year by 20%
∴ Cost of machine at the end of first year
= Rs. `(15625 - (15625 xx 20)/100)`
= Rs. (15625 - 3125)
= Rs. 12500
Cost of machine at the end of second year
= Rs. `(12500 - (12500 xx 20)/100)`
= Rs. [12500 - 2500]
= Rs. 10000
Cost of machine at the end of third year
= Rs. `(10000 - (10000 xx 20)/100)`
= Rs. [10000 - 2000] = Rs. 8000
Cost of machine at the end of fourth year
= Rs. `(8000 - (8000 xx 20)/100)`
=Rs. [8000 - 1600]
= Rs. 6400
Cost of machine at the end of fifth year
= Rs. `(6400 - (6400 xx 20)/100)`
= Rs. [6400 - 1280]
= Rs. 5120
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