Question

Depreciation applicable to an equipment is 20%. By how much per cent will the value of the equipment 3 years from now be less than the present value ?

Answer 1

Let the present value of the equipment be x. Then,

The value of the equipment three years from now = x\(\big(1-\frac{20}{100}\big)^3\)

= x x \(\big(\frac{4}{5}\big)^3\) = \(\frac{64X}{125}\)

\(\therefore\) Required percentage = \(\frac{\big(X-\frac{64X}{125}\big)}{X}\) x 100 = \(\frac{\big(\frac{125X-64X}{125}\big)}{X}\) x 100

= \(\frac{61}{125}\) x 100 = 48.8%