Question
A plant was purchased for ₹10,00,000. After 4 years,
its book value stands at ₹6,56,100 using the diminishing balance method. The annual rate of depreciation is:Solution
Let depreciation rate be *r*. Book Value after *n* years = Cost × (1 - r)^n 6,56,100 = 10,00,000 × (1 - r)^4 (1 - r)^4 = 6,56,100 / 10,00,000 = 0.6561 (1 - r) = ⁴√0.6561 = 0.9 (since 0.9^4 = 0.6561) r = 1 - 0.9 = 0.1 or 10%.
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