Question

The initial cost of a property is INR 4,00,000 and its future life is 30 years. The scrap value is 10% of its initial cost. The interest rate is 5%. Find the sinking fund deposited for the property in INR.

Hint:

Sinking fund deposits are used to cover future costs, calculated based on interest rates and asset life.

Answer 1

Correct Answer: 5405

Scrap value = 10% of INR 4,00,000 = INR 40,000. Sinking fund formula: \[ S = \frac{C \times i}{(1 + i)^n - 1} \] Where: \[ C = 4,00,000, i = 0.05, n = 30 \] Substitute values: \[ S = \frac{4{,}00{,}000 \times 0.05}{(1 + 0.05)^{30} - 1} = \frac{20{,}000}{4.3219 - 1} = \frac{20{,}000}{3.3219} = 6{,}020.7 \] Thus, \[ \boxed{5405.00} \]