document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1155467>Question 1155467</A>: <I><SPAN STYLE=\"word-break: break-all;\"> 6. A mainframe computer whose cost is k220 will depreciate to a scrap value of k12 in 5 <BR>\n" );
document.write( "years. what is the depreciation rate by use of the reducing balance method. [4 marks] </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #778057 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=778057\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> there are different ways to calculate reducing balance method.<BR>\n" );
document.write( "one of the simples, and the one i'll use her, is to depreciate by a set percentage each year.<BR>\n" );
document.write( "your initial value is 220 and your residual value is 12 in 5 years.<BR>\n" );
document.write( "the formula to use would be f = p * (1 + r) ^ n<BR>\n" );
document.write( "f is the future value (12)<BR>\n" );
document.write( "p is the present value (220)<BR>\n" );
document.write( "r is the interest rate per time period ( per year for this problem)<BR>\n" );
document.write( "n is the number of time period (in years for this problem)<BR>\n" );
document.write( "the formula becomes 12 = 220 * (1 + r) ^ 5.<BR>\n" );
document.write( "divide both sides of the formula by 12 to get 12 / 220 = (1 + r) ^ 5.<BR>\n" );
document.write( "take the fifth root of both sides of the equation to get (12 / 220) ^ (1/5) = 1 + r.<BR>\n" );
document.write( "subtract 1 from both sides of the equation to get (12 / 220) ^ (1/5) - 1 = r.<BR>\n" );
document.write( "solve for r to get r = -.4410773454.<BR>\n" );
document.write( "confirm by replacing r in the formula with that to get:<BR>\n" );
document.write( "12 = 220 8 (1 - .4410773454) ^ 5 to get 12 = 12.<BR>\n" );
document.write( "this confirms the value of r is correct.<BR>\n" );
document.write( "your solution is that the depreciation rate is -44.10773454% per year. *****<BR>\n" );
document.write( "your depreciation schedule would look like this.<BR>\n" );
document.write( "start with 220<BR>\n" );
document.write( "after 1 year, value is 122.962984<BR>\n" );
document.write( "after 2 years, value is 68.72679743<BR>\n" );
document.write( "after 3 years, value is 38.41296406<BR>\n" );
document.write( "after 4 years, value is 21.46987584<BR>\n" );
document.write( "after 5 years, value is 12<BR>\n" );
document.write( "note that this is only one of several reducing balance methods of depreciation.<BR>\n" );
document.write( "here's some references.<BR>\n" );
document.write( "<a  rel=nofollow HREF= \"https://debitoor.com/dictionary/reducing-balance-depreciation\" target = \"_blank\">https://debitoor.com/dictionary/reducing-balance-depreciation</a><BR>\n" );
document.write( "<a  rel=nofollow HREF= \"https://www.thehartford.com/business-insurance/strategy/depreciating-assets/reducing-balance-method\" target = \"_blank\">https://www.thehartford.com/business-insurance/strategy/depreciating-assets/reducing-balance-method</a><BR>\n" );
document.write( "<a  rel=nofollow HREF= \"https://www.thehartford.com/business-insurance/strategy/depreciating-assets/reducing-balance-method\" target = \"_blank\">https://www.thehartford.com/business-insurance/strategy/depreciating-assets/reducing-balance-method</a><BR>\n" );
document.write( "<a  rel=nofollow HREF= \"http://www.accioneduca.org/admin/archivos/clases/material/depreciation_1564412042.pdf\" target = \"_blank\">http://www.accioneduca.org/admin/archivos/clases/material/depreciation_1564412042.pdf</a><BR>\n" );
document.write( " </SPAN>\n" );
document.write( "</TD></TR></TABLE>\n" );