Concept: Sinking Fund Method: It is a technique for depreciating an asset while generating enough money to replace it at the end of its useful life. The sinking Fund coefficient(S) for n years is given below the formula S=
i
(1+i5)n−1
Where is = interest rate of sinking fund, i = rate of interest, and S = Sinking fund coefficient Year's Purchase(YP): It is defined as the capital sum required to be invested in order to receive an annuity of Re 1.00 at a certain rate of interest. YP=
1
(i+S)
Where i = rate of interest, and S = Sinking fund coefficient Calculation: Given Data Rate of interest(I) = 7% = 0.07 Coefficient of annual sinking fund(S) = 0.43 So, Year's Purchase(YP) YP=