Question

A piece of machinery was purchased by a factory. It depreciates at 10% every year. At the end of second year its value is ₹ 1,29,600. What was its cost price?

Answer 1

Given:

Present value (after 2 year) = ₹ 129600

Rate of depreciation = 10% p.a.

Number of years = 2

Present value = Value of an article n years ago `(1 - r/100)^n`, where r is the rate of depreciation and n is the number of years.

∴ `x(1 - 10/100)^2 = 129600`

⇒ `x(9/10)^2 = 129600`

⇒ `x = (129600 xx 10 xx 10)/(9 xx 9)`

⇒ `x = 160000`

Hence, the value of machine 2 years ago is ₹ 160000.