Question

The value of a machine depreciates at the rate of 10% per annum. It was purchased 3 years ago. If its present value is Rs. 43740, find its purchase price.

Answer 1

Given details are,

Present value of machine is = Rs 43740

Depreciation rate of machine is = 10% per annum

Let the purchase price 3 years ago be = Rs x

By using the formula,

A = P (1 + R/100)ⁿ

43740 = x (1 – 10/100) (1 – 10/100) (1 – 10/100)

43740 = x (90/100) (90/100) (90/100)

43740 = x (0.9) (0.9) (0.9)

43740 = 0.729x

x = 43740/0.729

= 60000

∴ The purchase price is Rs 60000.