Final answer:
To calculate the total interest on a hire-purchased machinery, the interest rate is applied to the unpaid balance annually. Modern Ltd will pay a total interest of Rs. 9,000 across three years, leading to a total payment of Rs. 69,000, which includes the cash price and the interest.
Step-by-step explanation:
The question involves calculating the total interest charge and the hire purchase price for machinery purchased by Modern Ltd from Bombay Machines Ltd. To calculate the interest, we need to apply the interest rate to the unpaid balance of the machine's cash price for each year until fully paid.
The cash price is Rs. 60,000, with an initial payment of Rs. 15,000, leaving a balance of Rs. 45,000 on which the first year's interest will be calculated. Every year, with the payment of Rs. 15,000, the principal amount reduces and the interest for the next year is calculated on this reduced balance.
For the first year, the interest is (45,000 * 10% = Rs. 4,500).
For the second year, the balance would be (45,000 - 15,000 = Rs. 30,000) and the interest (30,000 * 10% = Rs. 3,000).
For the third year, the balance becomes (30,000 - 15,000 = Rs. 15,000) and the interest (15,000 * 10% = Rs. 1,500).
The total interest paid over three years would be (Rs. 4,500 + Rs. 3,000 + Rs. 1,500 = Rs. 9,000).
Therefore, the total paid including the cash price and interest would be (Rs. 60,000 + Rs. 9,000 = Rs. 69,000).