Question

The value of a machine depreciates at the rate of 10\(\%\) every year. It was purchased 3 years ago. If its present value is Rs. 8748, its purchase price was

• A. 16000
• B. 12000
• C. 10000
• D. 8000

Answer 1

The Correct Option is B

Depreciation Calculation 

Let the purchase price be P. The depreciation formula is:

\( P \times \left(1 - \frac{r}{100}\right)^n = \text{Present value} \)

Here, r = 10%, n = 3, and the present value is Rs. 8748. Substituting into the formula:

\( P \times \left(1 - \frac{10}{100}\right)^3 = 8748 \) ⇒ \( P \times (0.9)^3 = 8748 \)

\( P \times 0.729 = 8748 \) ⇒ \( P = \frac{8748}{0.729} = 12000 \)

The purchase price P is Rs. 12000.