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Question
The cost of a machine is supposed to depreciate each year at 12% of its value at the beginning of the year. If the machine is valued at Rs. 44,000 at the beginning of 2008, find its value :
(i) at the end of 2009.
(ii) at the beginning of 2007.
Solution
Cost of machine in 2008 = Rs. 44,000
Depreciation rate = 12%
(i) ∴ Cost of machine at the end of 2009
= `"P"( 1 - r/100)^n`
= `44,000( 1 - 12/100 )^2`
= `44,000 xx ( 88/100 )^2`
= Rs. 34,073.60
(ii) Cost of machine at the beginning of 2007(P)
A = `"P"( 1 - r/100)^n`
⇒ 44,000 = P`( 1 - 12/100 )^1`
⇒ 44,000 = P`( 88/100 )^1`
⇒ P = `[44,000 xx 100]/88` = Rs. 50,000
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