500 PS section2 #1

[dunkin77]

Hi,

I know we just need to 8000 * 0.4 considering the 30% decrease per year, but I just wonder what is the case that we need to multiply 0.7 each year instead,,,,that is (8000*0.7)*0.7....


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

[ajith]

Hi,

I know we just need to 8000 * 0.4 considering the 30% decrease per year, but I just wonder what is the case that we need to multiply 0.7 each year instead,,,,that is (8000*0.7)*0.7....


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

Okay , Here we Go

8000 is the Current Market value

Decrease in Market value for first year = 8000*0.3

Market value after an year = 8000 - 8000*0.3
= 8000 ( 1-0.3)
= 8000 *0.7

That is how 0.7 comes in

Market Value Decrease for 2nd year = 8000*0.7*0.3

Market Value after 2nd Year = 8000 *0.7-8000*0.7*0.3

= 8000*0.7 ( 1-0.3)
=8000*0.7*0.7

Similarly at the end of the third year it will be 8000*0.7*0.7*0.7 etc .. etc ..

[Cybermusings]

Simple

8000 - 30% of 8000 in the first year
= 8000 - 2400 = 5600
Answer C

Next year = 5600 - 2400 = 3200 (Remember the machine decreases by 30% of its "original purchase price" each year.

[ajith]

Simple

(Remember the machine decreases by 30% of its "original purchase price" each year.)

In that case in 4 years you would have to pay for owning the machine, wouldn't you?

Its not original value mate , it is the current value!

[dunkin77]

Thanks Ajith for the explanation!

So, the difference is the decrease during the period and at the end of (as a result of) the period... I guess?

If the quesion above were "what was its market value at the end of 1984" instead of saying "what was its market value two years later", we should use 8000*0.07*0.07 instead?

Thanks again for your help!

[ajith]

Thanks Ajith for the explanation!

So, the difference is the decrease during the period and at the end of (as a result of) the period... I guess?

If the quesion above were "what was its market value at the end of 1984" instead of saying "what was its market value two years later", we should use 8000*0.07*0.07 instead?

Thanks again for your help!

Okay, rates (say be appreciation, depreciation or bank interests (either loan or deposits) are calculated for a time period say, one year.

When you say end of the period, you just specify it to clarify any ambiguity in time period.
Now if they say during the 2 year period, it is so clear that time period is two years. If the question above were "what was its market value at the end of 1984" , they have to specify when it started too, if it was in the start of 1982, the time period will be 3 years and if it started at the end of 1982 the time period would be 2 years, in these cases answer may vary from 8000*0.7*0.7*0.7 to 8000*0.7*0.7

[dunkin77]

Okay - I got it - thanks again for your help

[BTGmoderatorRO]

The purchase price is $8000.
30% of the purchase price is = 30% * 8000
= $2400

after the first year, the market price value is = $8000 - 30% of purchase price
=$8000 - $2400
= $5600

After the second year, the market value is ;
= $5600 - 30% of purchase price
=$5600 - $2400
= $3200

Now we have arrived at our destination. option C is thus the correct answer.