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Que – past year question MJ-21
Cabreras , can you please help me understand how did they get the scarp value in each case?The question says that the sale value will fall by 40% of the purchase price at the end of the first year. So it will be 800,000 – (40% x 800,000) = 480,000 (which is obviously the same at 60% x 800,000 🙂 ).
It will then reduce by 25% each year, so at the end of the second year it will be 480,000 – (25% x 480,000) = 360,000 (or 75% x 480,000).
And at the end of the third year it will be 360,000 – (25% x 360,000) = 270,000 (or 75% x 360,000).
I hope that helps 🙂
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