Question

The value of a machine depreciates 15% in the first year and increases by 10% in the second year. If its present value is ₹ 60000, find its value after 2 years.

Answer 1

Given:

• Present value of machine (V₀ = ₹ 60000)
• Depreciation in first year = 15%
• Increase in second year = 10%

Step-wise calculation:

1. Value after first year with 15% depreciation:

`V_1 = V_0 xx (1 - 15/100)`

V₁ = 60000 × 0.85

V₁ = ₹ 51000

2. Value after second year with 10% increase on the depreciated value:

`V_2 = V_1 xx (1 + 10/100)`

V₂ = 51000 × 1.10

V₂ = ₹ 56100

The value of the machine after 2 years is ₹ 56100.