The market value of a certain machine decreased by 30 percent of its purchase price each year. If the machine was purchased in 1982 for its market value of $8,000, what was its market value two years later?
(A) $8,000
(B) $5,600
(C) $3,200
(D) $2,400
(E) $800
answer choice C.
Depreciation every year is on purchase price not current market price.
so year 1 depreciation is : 0.3*8000=2400
year 2 depreciationis : 0.3 *8000 =2400
so total depreciationof value = 8000-4800 =3200
but Rs 8000 is mentioned as market price not purchase price….i didt understand,can u please explain
Answwer is C
30% decrease of Its purchase price every year.
2400*2= 5800
8000-5800= 3200
C.
Decrease in MV = 0.3*number_of_yrs_since_purchase*Purchase_price
= 0.3 * 2 * 8000 = 0.6 *8000 = 4800
Thus MV in 2 years = 8000 – 4800 = 3200
The market value of a certain machine decreased by 30 percent of its purchase price each year. If the machine was purchased in 1982 for its market value of $8,000, what was its market value two years later?
(A) $8,000
(B) $5,600
(C) $3,200
(D) $2,400
(E) $800
Ans is C
Ans is C.
I don’t agree with the explanation of “C”. It doesn’t look practical to me.
I feel that “decreased by 30 percent of its purchase price each year ” should refer Market value each year….
I request Take Gmat team to not put this kind of unrealistic question……
I also agree with Navin.
this is how i understood.
Market Value(MV) = 70/100*Purchase Price(PP)
Thus in 1982 = 8000 = 70/100*PP
1982 the PP value = 80000/7
1983 the market value =80000/7*70/100 = 8000
1984 – the market value = ((8000*100/70)*70/100)*(70/100)
= 5600$ (ANS B)
C