When you buy a car you know the value will depreciate as soon as
you leave the lot. Letβs day the equation that will show the
depreciation is π = 20,000(0.85)
π
. βVβ is the value of the car in the
βnthβ 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 _________________
- 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