The cost of a car, purchased 2 years ago, depreciates at the rate of 20% every year. If the present value of the car is ₹ 315600 find:
(i) its purchase price
(ii) its value after 3 years
Solution:
It is given that
Present value of car = ₹ 315600
Rate of depreciation (r) = 20%
(i) We know that
Purchase price = A ÷ (1 – r/100)n
Substituting the values
= 315600 ÷ (1 – 20/100)2
By further calculation
= 315600 × 5/4 × 5/4
= ₹ 493125
(ii) We know that
Value after 3 years = 315600 × (1 – 20/100)3
By further calculation
= 315600 × 4/5 × 4/5 × 4/5
= ₹ 161587.20
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