Question
A company replaces their cars every 6 years. A car is worth $13520 after 2 years. The company uses a depreciation rate of 35% a year.
a) How much will the car be worth when the company replaces it?
b) How much did the car cost when it was purchased?
a) How much will the car be worth when the company replaces it?
b) How much did the car cost when it was purchased?
Answers
Steve
if the initial value is v,
v - .35(2) = 13520
Now, knowing v, after n years the car is worth
v(1 - .35n)
Note that the car is fully depreciated after only 3 years, if the depreciation is 35% of the full value each year.
v - .35(2) = 13520
Now, knowing v, after n years the car is worth
v(1 - .35n)
Note that the car is fully depreciated after only 3 years, if the depreciation is 35% of the full value each year.