The value of a machine depreciates by 10% every year. After two years the value of machine decreases by :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 19%
Depreciation follows an experimental decay formula,
$V=P×(1-r)^t$
$=P×(1-0.10)^2$
$=P×0.81$
Decrease = $P-V$
$=P-P×0.81$
$=P×6.19$
∴ Machine value decreases by 19%