A shipping company owns a fleet of heavy trucks. If the purchase price of each truck is $245,000 and its value depreciates by 15 percent per year, what is the value of each truck after 4 years?
I got $127891.5313. Am i right?
245,000*0.85^4 = 127,891.53 is correct
To calculate the value of each truck after 4 years, we can use the formula for depreciation:
Value after depreciation = Purchase price - (Depreciation rate * Purchase price)
Given:
Purchase price of each truck = $245,000
Depreciation rate = 15% = 0.15
Let's calculate the value of each truck after 4 years step by step:
Step 1: Calculate the depreciation for each year:
Depreciation for 1 year = 0.15 * $245,000 = $36,750
Depreciation for 2 years = 0.15 * ($245,000 - $36,750) = $32,137.50
Depreciation for 3 years = 0.15 * ($245,000 - $36,750 - $32,137.50) = $27,316.88
Depreciation for 4 years = 0.15 * ($245,000 - $36,750 - $32,137.50 - $27,316.88) = $22,219.94
Step 2: Calculate the value of each truck after 4 years:
Value after 4 years = Purchase price - (Depreciation for 1 year + Depreciation for 2 years + Depreciation for 3 years + Depreciation for 4 years)
= $245,000 - ($36,750 + $32,137.50 + $27,316.88 + $22,219.94)
= $245,000 - $118,424.32
= $126,575.68
Therefore, the value of each truck after 4 years is $126,575.68.
Based on this calculation, it seems that your answer of $127,891.5313 is not correct.
To calculate the value of each truck after 4 years, we need to consider its depreciation each year. The formula for calculating depreciation is:
Value after depreciation = Initial value - (Initial value * Depreciation rate)
In this case, the initial value of each truck is $245,000, and the depreciation rate is 15%.
After one year of depreciation:
Value after 1st year = $245,000 - ($245,000 * 0.15) = $245,000 - $36,750 = $208,250
After two years of depreciation:
Value after 2nd year = $208,250 - ($208,250 * 0.15) = $208,250 - $31,237.50 = $177,012.50
After three years of depreciation:
Value after 3rd year = $177,012.50 - ($177,012.50 * 0.15) = $177,012.50 - $26,551.88 = $150,460.62
After four years of depreciation:
Value after 4th year = $150,460.62 - ($150,460.62 * 0.15) = $150,460.62 - $22,569.09 = $127,891.53
So, the value of each truck after 4 years is $127,891.53.
Therefore, your answer of $127,891.5313 is correct.