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The market value of a certain machine decreased by 30

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Senior Manager
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The market value of a certain machine decreased by 30 [#permalink] New post 27 Jun 2007, 09:57
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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
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 [#permalink] New post 27 Jun 2007, 10:09
something is wrong with this question.

If the market value is X, then
after 1 year it is 0.7X
2 years later it must be 0.7X*0.7=0.49X

so answer should be 0.49*8000=3920

but there is no such answer.
maybe they took 8000 *(1-2*0.3)=3200
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 [#permalink] New post 27 Jun 2007, 10:25
UMB wrote:
something is wrong with this question.

If the market value is X, then
after 1 year it is 0.7X
2 years later it must be 0.7X*0.7=0.49X

so answer should be 0.49*8000=3920

but there is no such answer.
maybe they took 8000 *(1-2*0.3)=3200


I think that the 3,200 is correct; there isn't anything wrong. The question states that "decreased by 30 percent of its purchase price each year," which to me, indicates a 30% drop in value per year of the machine.

Does it make sense to depreciate in that method? I don't think so, but the way the question is worded, I would go with 3,200.
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 [#permalink] New post 02 Oct 2007, 13:52
UMB wrote:
something is wrong with this question.

If the market value is X, then
after 1 year it is 0.7X
2 years later it must be 0.7X*0.7=0.49X

so answer should be 0.49*8000=3920

but there is no such answer.
maybe they took 8000 *(1-2*0.3)=3200


it is 30% of purchase price

not 30% of market value and the subsequent market value (year 2)

so it is .30 (8000) = 2400
x2 = 4800

8000 - 4800 = 3200
  [#permalink] 02 Oct 2007, 13:52
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