In January 2010, Timʹs Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2010, Tim spent $200,000 on new machines. During 2010, Timʹs net investment totalled
A) $200,000.
B) $100,000.
C) $300,000.
D) $1 million.

Question

Quizplus · Accepted Answer

The initial value of the machines was $1 million, and a 30% decrease means a loss of $300,000 in value. Tim spent $200,000 on new machines, so the net investment is $200,000 (new investment) - $300,000 (depreciation) = -$100,000. However, since the question asks for net investment, which is the total amount spent on new machines, the correct answer is $100,000.