A car is purchased for $30,000. It depreciates at a rate of 18% per year. What equation would represent the value, y, of the car after x number of years? Use this equation to find the value of the car after five years.

Answer 1

The standard equation for depreciation is
FV=PV(1-i)ⁿ
where
FV=future value
PV=present value
i=depreciation rate per annum, in decimals
n=number of years

Example:
Find the value of a car after 10 years if it was purchased for 50000 and depreciated at 20% per year.
PV=50000
i=0.20
n=10
FV(after 10 years)
=PV(1-i)^n
=50000(1-0.20)^10
=$5368.71