Depreciation of a Machine

Introduction:
Depreciation refers to the decrease in the value of an asset over time. In this case, the value of a machine is depreciating by 5% every year. We need to determine the value of the machine after 2 years, given that its present value is 100,000.

Calculating the Depreciation:
To calculate the depreciation of the machine, we need to multiply its present value by the depreciation rate for each year. Since the depreciation rate is 5%, we can calculate the depreciation for each year as follows:

Year 1:
Depreciation = 100,000 * 0.05 = 5,000

Year 2:
Depreciation = (100,000 - 5,000) * 0.05 = 4,750

Calculating the Value after 2 Years:
To determine the value of the machine after 2 years, we subtract the total depreciation from its present value.

Total Depreciation = Depreciation in Year 1 + Depreciation in Year 2
Total Depreciation = 5,000 + 4,750 = 9,750

Value after 2 Years = Present Value - Total Depreciation
Value after 2 Years = 100,000 - 9,750 = 90,250

Hence, the value of the machine after 2 years will be 90,250.

Summary:
- Depreciation refers to the decrease in the value of an asset over time.
- The value of the machine depreciates by 5% every year.
- To calculate the depreciation, multiply the present value of the machine by the depreciation rate.
- The value of the machine after 2 years can be determined by subtracting the total depreciation from its present value.
- In this case, the value of the machine after 2 years will be 90,250.