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The value of machine depreciates every year by 30%. The value of machine after 2 years would be Rs.34,300. What is the present value of machine?1. Rs.70,0002. Rs.49,0003. Rs.50,0004. None of these |
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Answer» Correct Answer - Option 1 : Rs.70,000 Given: The value of a machine depreciates by 30% every year. Value of the machine at the end of 2 years would be Rs.34,300. Concepts used: The present value of machine = Value of machine at the end of 2 years/(1 – Rate of depreciation)2 Calculation: Let the present value of machine be Rs. Z. The present value of machine = Value of machine at the end of 2 years/(1 - Rate of depreciation)2 ⇒ Z = Rs. 34,300/(1 – 0.30)2 ⇒ Z = Rs. 34,300/(0.70)2 ⇒ Z = Rs. 70,000. ∴ The present value of the machine is Rs.70,000. Alternate method: Let the present value be Rs. x After 1st year, value = Rs. 70x/100 After 2nd year, it will be = Rs. {(70x/100) × (70/100)} = Rs. (0.7 × 0.7 × x) ⇒ (0.7 × 0.7 × x) = 34300 ⇒ x = 34300/(0.7 × 0.7) ⇒ x = 70000 ∴ The present value of the machine is Rs.70,000.
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