My blog posts are a reflection of my thoughts, beliefs, stuff that I figured out. It's quite possible that there are articles by other authors that were perhaps written much earlier, some of which align with my thoughts and some that don't. Pls read the "About Me" para to understand more.
Monday, August 24, 2020
Smart Expense Analysis
Recently I went to get my bike serviced at the authorized service center. The bike is more than 10 years old and I was thinking of exchanging it for a new one. I was told the servicing would cost Rs 2000 to Rs2500. I asked the service engineer how much I would get for my bike. The guy told me that my bike would fetch Rs5000 approximately.
I thought. What sense did it make to spend Rs 2000+ on servicing my bike whose value was Rs 5000?
Here was an interesting question. The cost of a new bike was Rs 60,000. And my bike was in good condition. If I got it serviced, I was sure I could use it for at least one more year easily without problem.
Why incur cash outflow of Rs 60k and incur about Rs 5k depreciation for the current year (=(60-5)/12) assuming straight line depreciation and 12 years life and scrap value of Rs5k) for new bike when I could service it for Rs 2500 and no cash outflow.
So I got it serviced. I will worry about a new bike next.
Sometimes, what seems at face value may not be right!
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