Question

Tick the correct answer in each of the following:

The value of a machine depreciates at the rate of $20\%$ per annum. It was purchased 2 years ago. If its present value is Rs 40000, for how much was it purchased?

(a) Rs 56000 (b) Rs 62500 (c) Rs 65200 (d) 56500

Answer 1

$\text{Present value = Rs. 40000}\text{Rate of depreciation (R) =}20\%p.q.\therefore \text{Value of machine 2 years ago}=A÷{(1-\frac{R}{100})}^n=Rs.40000÷{(1-\frac{20}{100})}^2=Rs.40000÷{\left(\frac{4}{5}\right)}^2=Rs.40000\times \frac{5}{4}\times \frac{5}{4}=Rs.62500\left(b\right)$