Question

The machines depreciates at the rate of 15% in first year and 35% in the second year. If the present value of machine is Rs. 11,500, find the value of machine after 2 years.

1. Rs. 6,343.25
2. Rs. 6,250.25
3. Rs. 6,353.75
4. Rs. 6,500.75

Answer 1

Correct Answer - Option 3 : Rs. 6,353.75

Given:

The machines depreciate at the rate of 15% in first year and 35% in the second year.

The present value of machine is Rs. 11,500.

Concepts used:

Value of machine after 2 years = Present value of machine × {(1 – depreciation rate in 1^st year) × (1 – depreciation rate in 2^nd year)}

Calculation:

Present value of machine = Rs. 11,500

Value of machine after 2 years = Present value of machine × {(1 – depreciation rate in 1^st year) × (1 – depreciation rate in 2^nd year)}

⇒ Value of machine after 2 years = Rs. 11,500 × (1 – 0.15) × (1 – 0.35)

⇒ Value of machine after 2 years = Rs. 6,353.75

∴ Value of machine after 2 years will be Rs. 6,353.75.