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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]

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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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Joined: 28 Feb 2007
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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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Joined: 27 Jun 2007
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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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Joined: 21 Jan 2007
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Location: New York City
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02 Oct 2007, 13:52
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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

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
02 Oct 2007, 13:52
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The market value of a certain machine decreased by 30

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