A company, in anticipation of expanding, agrees to buy one photocopying machine at the start of each year for 5 years. The company pays $1000 for each machine. At the start of the sixth year, the company becomes bankrupt and has to sell all five machines. The machines depreciate (lose value) at the rate of 10% per year. Show that the first machine purchased is worth $590.49 at the time of bankruptcy
Just arrived on this website, and this problem just appeared to me. So here is the answer :
The first machine has been bought $1000. Each year, due to the depreciation, 10% of the value of the machine has to be deducted then to summurise :
Year 1 = 1000
Year 2 = 1000 - 10% = 1000 - 100 = $900
Year 3 = 900 - 10% = 900 - 90 = $810
Year 4 = 810 - 10% = 810 - 81 = $729
Year 5 = 729 - 10% = 729 - 72.9 = $656.1
Year 6 = 656.1 - 10% = 656.1 = 65.61 = $590.49
Hope this is clear enough
Cheers
Just arrived on this website, and this problem just appeared to me. So here is the answer :
The first machine has been bought $1000. Each year, due to the depreciation, 10% of the value of the machine has to be deducted then to summurise :
Year 1 = 1000
Year 2 = 1000 - 10% = 1000 - 100 = $900
Year 3 = 900 - 10% = 900 - 90 = $810
Year 4 = 810 - 10% = 810 - 81 = $729
Year 5 = 729 - 10% = 729 - 72.9 = $656.1
Year 6 = 656.1 - 10% = 656.1 = 65.61 = $590.49
Hope this is clear enough
Cheers
