Question

A manufacturer reckons that the value of a machine which costs him ₹31250 depreciates each year by 20%. Find its value after 2 years.

[Hint: Value after 2 years = ₹31250 × $$\left(1 - \frac{20}{100}\right)^2$$.]

Answer 1

Each year the machine keeps $$100\% - 20\% = 80\%$$ of its value.

$$\text{Value after 2 years} = 31250 \times \left(1 - \frac{20}{100}\right)^2$$

$$= 31250 \times \left(\frac{4}{5}\right)^2$$

$$= 31250 \times \frac{16}{25}$$

$$= 1250 \times 16$$

$$= 20000$$

Hence, the value of the machine after 2 years is ₹20,000.