In January 2017, Tim's Gyms, Inc.owned machines valued at $1 million.During the year, the market value of the machines fell by 10 percent.During 2017, Tim spent $200,000 on new machines.During 2017, Tim's net investment was
A)$1.1 million.
B)$300,000.
C)$1 million.
D)$200,000.
E)$100,000.

Question

Quizplus · Accepted Answer

Net investment is calculated by subtracting the depreciation (or decrease in value) of the existing assets from the amount spent on new assets. The machines originally valued at $1 million decreased by 10%, which is a $100,000 decrease. Tim spent $200,000 on new machines. Therefore, his net investment is $200,000 (new investment) - $100,000 (decrease in value) = $100,000.