A piece of equipment cost a certain factory ₹ 600, 000. If it depreciates in value 15% the first, 13.5% the next year, 12% the third year, and so on. What will be its value at the end of 10 years, all percentages applying to the original cost?
Given: A piece of equipment cost a certain factory is 600,000
To find: Value of the equipment at the end of 10 years
It depreciates 15%, 13.5%, 12% in 1st, 2nd, 3rd year and so on.
This means price of equipment is depreciating in an A.P.
A.P. will be 15, 13.5, 12,…………………………upto 10 terms
Hence a = 15, d = 13.5 – 15 = –1.5
Formula used:
where a is first term, d is common difference and n is number of terms in an A.P.
Therefore,
Total percentage of depreciation in 10 years,
⇒ S10 = 82.5
Value of the equipment at the end of 10 years,
= 175 × 600
= 105000
Hence, value of equipment at the end of 10 years is Rs. 105000