Question

a new car sells for $25,000. the value of the car decreases by 15% each year. what is the approximate value of the car 5 years after it is purchased

Answer 1

25,000 (1 minus 0.15) Superscript 5, or approximately $11,093

Explanation:

A

Answer 2

Given:
Initial value = 25,000
depreciation = 15% per annum based on net book value

Net book value = 25,000 (1 - 0.15)^t

where t is the number of years

NBV = 25,000 (0.85)^5
NBV = 25,000 (0.4437)
NBV = 11,092.50

The approximate value of the car 5 years from date of purchase is 11,092.50