A car depreciates at a rate of %30 per year. How much will a 20,000 car be worth after 5 years?
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M$3 Answers
On the first year, the depreciation will be 20,000*0.3 = 6000.
So the value of the car on the second year would be 14,000. Then on that year, the prices declines by 4200 (14,000*0.3).
Then the starting price on the third year => 14,000 - 4,200 = 9,800.
Depreciation for the 3rd year would be 9800*0.3 = 2940.
Starting price for 4th year => 9800-2940 = 6860.
Depreciation of 4th year => 6860*0.3 = 2058.
Price as of 5th year = 6860 - 2058 = 4802.
Depreciation would be => 4802 * 0.3 = 1440.6
Therefore the price of the car after 5 years would be 4802 - 1440.6 = 3361.4
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METHOD 2 (Simple Method)
Use this Formula : V = P(1-R)^n
V= Future Value
P= Present Value
R= Depreciation Rate
n= Number of years.
By substituting, V = 20,000 ( 1 - 0.3 ) ^ 5
Then V = 3361.4 .
Hope this helps ! Correct me if I am mistken at any calculations. :)
For more information, refer this Wikipedia page about Depreciation.
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M$
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M$
Solution: $20,000 x .30 = $6,000 depreciation per year; $6,000 x 5 years= $30,000.00 Accumulated Depreciation.
Personal computation.
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M$
there's an error at the 5th year, verify your calculation-the method is good though
Also, can you solve it directly, using only one formula?
Great. What happens is that at each step you multiply by 1-0.3
So your first proof shows what is behind that formula.
Hi @mielu_istetz !
Thanks for pointing out the mistake.
*Mistake corrected.
*Source Added.
*Added a formula to find the Depreciation Rate easily. :)