A piece of machinery is bought for Rs. 50,000. In the first year, it depreciates by 15%, and in each subsequent year, the depreciation rate increases by 5% from the previous year. The value of machinery after 3 years will be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 25,500
The depreciation rates for the three years are 15%, 20% and 25%. Each year’s rate is applied to the value at the start of that year (the written-down value), so the value is multiplied by \((1 - \text{rate})\) each year:
\(\text{After year 1: } 50000 \times 0.85 = 42500\)
\(\text{After year 2: } 42500 \times 0.80 = 34000\)
\(\text{After year 3: } 34000 \times 0.75 = 25500\)
So the value after 3 years is Rs. 25,500.
If instead each rate were taken on the original cost, the value would be 50000 − 7500 − 10000 − 12500 = Rs. 20,000, which is not among the options; the rates are meant for the reducing value.
Note: This topic was not in the CUET 2026 syllabus.