To find the book value of a car after 3 years of depreciation, we first need to understand how depreciation works. In this case, the car depreciates by 30% of its value each year.
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Initial Cost of the Car: $25,000
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Depreciation Calculation:
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At the end of Year 1: \[ \text{Depreciation for Year 1} = 0.30 \times 25,000 = 7,500 \] \[ \text{Book Value at the End of Year 1} = 25,000 - 7,500 = 17,500 \]
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At the end of Year 2: \[ \text{Depreciation for Year 2} = 0.30 \times 17,500 = 5,250 \] \[ \text{Book Value at the End of Year 2} = 17,500 - 5,250 = 12,250 \]
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At the end of Year 3: \[ \text{Depreciation for Year 3} = 0.30 \times 12,250 = 3,675 \] \[ \text{Book Value at the End of Year 3} = 12,250 - 3,675 = 8,575 \]
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Final Result: The book value of the car at the end of 3 years is $8,575.