When you buy a car you know the value will depreciate as soon as

Question

you leave the lot. Let’s day the equation that will show the
depreciation is 𝑉 = 20,000(0.85)
𝑛
. “V” is the value of the car in the
“nth” year since it was purchased. Determine the:

- Purchase price of the car ______________________
- Annual rate of depreciation ____________________
- Decay Factor ______________________________
- The value of the car at the end of 4 years _________________

Answer 1

- Purchase price of the car: $20,000

- Annual rate of depreciation: 0.85 (or 85%)

- Decay Factor: 0.85

- The value of the car at the end of 4 years:
$20,000(0.85)^4 = $20,000(0.52200625) = $10,440.13