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.
By Using Formula
A = P[1 - (r/100)]n
Here, P = principal = Rs. 15625
r = rate of depreciation = 20%
n = number of years = 5 years
A be the depreciated value
Putting values in the formula,
Depreciated Value = 15625[1 - (20/100)]5
= 15625[1 - (1/5)]5
= 15625(4/5)5
= (15625 × 1024)/3125
= 5 × 1024
= 5120
Thus, the depreciated value of the machine after 5 years is
Rs. 5125.