The Rental Depreciation Problem. The owner of a rental house can depreciate its value over a period of 27 ½ years, meaning that the value of the house declines at an even rate over that period of time until the value is $0.

Question

a. By what fraction does the value of the house depreciate the first year?
b. If the house is judged to be worth $85,000, what is the value of the first year’s depreciation?

Answer 1

1/27.5 = .03636 or about 3.6 % per year

85,000/27.5 = $3090.91