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Sum

The value of the machine depreciates at the rate of 15% p.a. It was purchased 2 years ago. Its present value is Rs. 7225. What was the purchase price of the machine?

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#### Solution

Given,

Rate of depreciation = r = 15%

Number of years = n = 2 years.

Present value of machine = P.V. = ₹ 7,225

The purchase price (V) of the machine can be found out using

P.V. = V`(1 - "r"/100)^"n"`

∴ 7225 = V`(1 - 15/100)^2`

∴ V`((100 - 15)/100)^2 = 7225`

∴ V`(85/100)^2 = 7225`

∴ V`(17/20)^2 = 7225`

∴ V = `(7225 xx 20 xx 20)/(17 xx 17)`

∴ V = 10,000

∴ The purchase price of the machine was ₹ 10,000/-.

Concept: Depreciation

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