1.A machine costs R500 000 and will depreciate to a scrap value of R15 000 in 10 years. Using reducing method of depreciation, calculate the book value of the machine at the end of the fifth year. Show your workings.
2. A machine that costs R100 000 is expected to last 5 years and then scrapped for R15 000. Its expected returns are :
Year 1:R25 000 Year 2: R45000 Yr3 : R40 000 Yr 4 :R35 000 Yr 5 R30 000
If projects of this type are expected to return at least 20%, should the machine be purchased. Show your calculations.
The expert examines quantitative methods for expected returns. The machine costs are provided.