
aA farmer buys a combine harvester at a cost of R1,3 million. The depreciation on the harvester is calculated at 12% p.a on a reducing balance. Calculate the book value of the harvester at the end of eight years.(5)

bCalculate the expected cost of a new combine harvester in eight years time if the rate of inflation is estimated to be 5% p.a.(5)

1.3If the farmers sells the old harvester at its book value at the end of eight years and uses the money as payment towards the harvester, calculate how much additional money he requires.(5)

1.4The farmer sets up a sinking fund and plans to accumulate R1,5 million in the fund at the end of eight years by making equal quarterly payments into the fund. Calculate the quarterly payments into the fund. Calculate the quarterly payments if his first payment is made in three month's time and the last payment is made at the end of eight years. The interest rate on money accumulated in the fund is 12% p.a. compounded quarterly.(6)
(21)
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