Calculate sinking fund installment

A building was constructed at Rs. 2,00,000. Salvage value is 10% of cost of construction. Life of Building is 75 years. Calculate sinking fund installment if rate of interest is 3%.

Installment of sinking fund I = S_i / (I + 2)^n-1

Where

S = Total amount of sinking fund to be accumulated i= Rate of interest n=No. of years I=Installment of sinking fund.

Therefor S = 2,00,000 x (90/100) = 1,80,000

Therefore Total amount of sinking fund to be accumulated = Rs.18,000

Therefor, i=3%=0.03  n=75

Therefore I=180000 x 0.03 / (1+0.03)^{75 – 1}

= 180000 x 0.03 / (1.03)⁷⁴

= 605.95

Therefor

I = Rs. 605.95/-