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# The market value of a certain machine decreased by 30

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Senior Manager
Joined: 19 Feb 2007
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The market value of a certain machine decreased by 30 [#permalink]  27 Jun 2007, 08:57
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Question Stats:

100% (02:29) correct 0% (00:00) wrong based on 1 sessions
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
Senior Manager
Joined: 28 Feb 2007
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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

but there is no such answer.
maybe they took 8000 *(1-2*0.3)=3200
Manager
Joined: 27 Jun 2007
Posts: 200
Followers: 3

Kudos [?]: 19 [0], given: 0

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

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.
CEO
Joined: 21 Jan 2007
Posts: 2760
Location: New York City
Followers: 9

Kudos [?]: 387 [1] , given: 4

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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

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
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