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.
Answer:
Given cost of the machine = 15625
every year rate depreciated by 20%.
Now Estimated value at first year = 15625(1 - 20/100)
Estimated value at second year = 15625(1 - 20/100)2
Estimated value at third year = 15625(1 - 20/100)3
and so no.
Now estimated value at the end of 5 years = 15625(1 - 20/100)5
= 15625(1 - 1/5)5
= 15625{(5-1)/5}5
= 15625{4/5}5
= (15625*1024)/3025
= 5*1024
= 5120
So estimated value at the end of 5 years = 5120 rupees
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