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Question - Satine Enterprises LTD recently bought a new company car for $25 000. The firm expects to replace it in five years' time. The current market re-sale of the car in five years time is $2900. The firm uses an annual depreciation of 35%.
a) Using the RBM calculate the book value of the car after the first two years.
b) Calculate by how much the car would have depreciated if the SLM had been used instead.
c) Explain which method would reduce the value by the most by the end of the third year.
d) Examine the strengths and weaknesses of both methods.
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