Question

A car costing $25 000 it depreciates 30% of its value each year. What is the book value at the end of 3 years?

Answer 1

To calculate the book value of the car at the end of 3 years, we can apply the depreciation formula for each year. The car depreciates by 30% of its value each year, which means it retains 70% of its value.

1. **Initial Value**: $25,000
2. **Depreciation Rate**: 30% (which means it retains 70% of its value)

The formula for the value at the end of each year is:

\[
\text{Value at end of year} = \text{Value at start of year} \times (1 - \text{depreciation rate})
\]

### Year 1:
\[
\text{Value at end of Year 1} = 25000 \times (1 - 0.30) = 25000 \times 0.70 = 17500
\]

### Year 2:
\[
\text{Value at end of Year 2} = 17500 \times (1 - 0.30) = 17500 \times 0.70 = 12250
\]

### Year 3:
\[
\text{Value at end of Year 3} = 12250 \times (1 - 0.30) = 12250 \times 0.70 = 8575
\]

Thus, the book value of the car at the end of 3 years is **$8,575**.