A company sets aside a sum of Rs 1000 at the end of each year in a sinking fund so that at the end of 10 years, t would amount to a balance sufficient to replace the machinery . Assuming that the cost of machinery remains constant at the end of 10 years and that money earns 5% per annum compound interest, find the cost of the machinery.
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : 12577.9
Using FVAF tables
$A=RS_{\overline{n}/i}$
$A=1000×S_{\overline{10}/0.05}$
$A=1000×12.5779$
$A=12577.9$