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Exercise 5.2 · Q21

Q.A machine depreciates in value by one-fifth each year. If the machine is now worth ₹51000, how much will it be worth 3 years from now?

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Value shrinks by a constant fraction each year (GP), so after 3 years the ₹51,000 machine is worth ₹26,112.

[!FORMULA] Vn=V0(1−d)nV_n = V_0(1-d)^n

V0V_0 = present value, dd = rate of depreciation per year, nn = number of years.

  1. Given V0=51000V_0=51000 and depreciation rate d=15=0.2d=\dfrac15=0.2 per year, so the machine retains 1−d=451-d=\dfrac45 of its value each year.
  2. Worth after 3 years: V3=51000(45)3V_3 = 51000\left(\dfrac{4}{5}\right)^{3}. …

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