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Financial Maths, SMB-021

Manou purchased an oven that depreciates in value by 15% per annum. Two years after it was purchased it had depreciated to a value of $6069, using the declining balance method.

What was the purchase price of the oven?   (2 marks)

--- 4 WORK AREA LINES (style=lined) ---

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`$8400`

Show Worked Solution

`S = V_0 (1-r)^n`

`6069` `= V_0 (1-0.15)^2`
`6069` `= V_0 (0.85)^2`
`V_0` `= 6069/0.85^2`
  `= 8400`

 

`:.\ text(The purchase price) = $8400`

Filed Under: Depreciation Tagged With: num-title-ct-coreb, smc-4335-28-Find V

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