A company purchases a machine for $50 000. The two methods of depreciation being considered are the declining-balance method and the straight-line method.
For the declining-balance method, the salvage value of the machine after `n` years is given by the formula
`S=V_(0)xx(0.80)^(n),`
where `S` is the salvage value and `V_(0)` is the initial value of the asset.
- What is the annual rate of depreciation used in this formula? (1 mark)
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- Calculate the salvage value of the machine after 3 years, based on the given formula. (2 marks)
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