Question

The present value of an oil engine is Rs. $14,580$. What was worth of the engine $3$ years before if the value depreciates at the rate of $10\%$ every year?

Answer 1

Here,

$Principal\left(P\right)=14580$

$Time\left(T\right)=3years$

$Rate\left(R\right)ofdepreciation=10\%$

Since it is case of depreciation, value of engine $3$ would be greater than present value.

let $RsP$ be the value of engine $3$ years back.

$Amount\left(A\right)=currentvalue=Rs14580$

Apply the concept of compound depreciation

$A=P(1-\frac{R}{100}{)}^T(sincedepreciation)$

$14580=P(1-\frac{10}{100}{)}^3$

$14580=P(\frac{9}{10}{)}^3$

$P=20000$

$\therefore$ value of engine $3$ years back $=Rs.20000$