6. A motorcycle purchased for $12,500 today will be valued 7% less each year. How much could you expect to receive for the motorcycle at the end of 4 years if you wanted to sell it
12500*0.93^4
To calculate the future value of the motorcycle after 4 years with a 7% annual depreciation rate, we need to find its value at the end of each year and subtract 7% from the previous year's value.
Here's how you can calculate it step by step:
1. Calculate the decrease in value each year:
Year 1: $12,500 - (7% of $12,500) = $12,500 - ($12,500 * 0.07) = $12,500 - $875 = $11,625
Year 2: $11,625 - (7% of $11,625) = $11,625 - ($11,625 * 0.07) = $11,625 - $814.88 = $10,810.12
Year 3: $10,810.12 - (7% of $10,810.12) = $10,810.12 - ($10,810.12 * 0.07) = $10,810.12 - $756.71 = $10,053.41
Year 4: $10,053.41 - (7% of $10,053.41) = $10,053.41 - ($10,053.41 * 0.07) = $10,053.41 - $703.74 = $9,349.67
Therefore, you could expect to receive $9,349.67 for the motorcycle at the end of 4 years if you wanted to sell it.