Question

Ravi buys a car worth ₹4.5 lakhs. The car's value depreciates by 20% each year. He drives it for 2 years and sells it for ₹3 lakhs. Find his overall profit or loss % in this transaction.

• A. 5.33%
• B. 3.75%
• C. 4.16%
• D. 5.86%

Answer 1

The correct option is C 4.16%

Original value of the car = ₹4.5 lakhs

After 1st year depreciation, value of the car = 4.5 lakhs - 20% of 4.5 lakhs
$=4.5-\frac{20}{100}\times 4.5=4.5-0.9$
= ₹3.6 lakhs

After 2nd year depreciation, value of the car = 3.6 lakhs - 20% of 3.6 lakhs
$=3.6-\frac{20}{100}\times 3.6$
= ₹2.88 lakhs

He sold it for ₹3 lakhs.

Profit = 3 lakhs - 2.88 lakhs = 0.12 lakhs = ₹12000

Profit % has to be calculated on the depreciated value after 2 years and not on the original cost price.

Profit % = $\frac{12000}{288000}\times 100$ = 4.16%