A machine is purchased for Rs. 625000. Its value depreciates at the ra

1.	A machine is purchased for Rs. 625000. Its value depreciates at the rate of 8% per annum. What will be its value after 2 years?
Answer» Present value of machine, P = Rs.625000 Time, n = 2 years Rate of depreciates, R = 8% per annum Now, Amount (A) = P (1 + R/100)ⁿ [Where, A = Amount with compound interest P = Present value R = Annual interest rate n = Time in years] ∴ Value = P (1 - R/100)ⁿ [∵ Rate decreases] = 625000 (1 - 8/100)² = 625000 (1 - 2/25)² = 625000 (23/25)² = 625000 × 729/625 = 1000 × 529 = 529000 ∴ Value of machine after 2 years will be Rs.529000.

A machine is purchased for Rs. 625000. Its value depreciates at the rate of 8% per annum. What will be its value after 2 years?

Answer»

Present value of machine, P = Rs.625000

Time, n = 2 years

Rate of depreciates, R = 8% per annum

Now,

Amount (A) = P (1 + R/100)ⁿ [Where, A = Amount with compound interest

P = Present value

R = Annual interest rate

n = Time in years]

∴ Value = P (1 - R/100)ⁿ [∵ Rate decreases]

= 625000 (1 - 8/100)²

= 625000 (1 - 2/25)²

= 625000 (23/25)²

= 625000 × 729/625

= 1000 × 529

= 529000

∴ Value of machine after 2 years will be Rs.529000.