A company purchased a machine for $30,000, used for 5 years and then sold it for $10,000. If capital is worth 8%, determine the annual cost. Use sinking fund method for depreciation analysis
Added by Vic J.
Step 1
First, we need to find the annual sinking fund payment (A) that will accumulate to the depreciation amount (D) over the 5-year period. The depreciation amount is the difference between the purchase price and the selling price: D = $30,000 - $10,000 = $20,000. Show more…
Show all steps
Your feedback will help us improve your experience
Geoffrey Carr and 54 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
A machine shop purchased 10 years ago a milling machine for P60,000. A straight-line depreciation reserve had been provided on a 20 year life of the machine. The owner of the machine shop desires to replace the old milling machine with a modern unit of many advantages costing P100,000. It can sell the old unit for P20,000. How much new capital will be required for the purchase?
Ameer S.
Depreciation in Value Each year a machine loses $20 \%$ of the value it had at the beginning of the year. Find the value of the machine at the end of 6 years if it cost $\$ 100,000$ new.
Further Topics in Algebra
Geometric Sequences and Series
Depreciation A company buys a machine for 225,000 dollars that depreciates at a rate of $30 \%$ per year. Find a formula for the value of the machine after $n$ years. What is its value after 5 years?
Series and Taylor Polynomials
Series and Convergence
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD