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? 25,000 (1 minus 0. 15) Superscript 5, or approximately $11,093 25,000 minus 1500 (5), or approximately $17,500 25,000 (0. 15) Superscript 5, or approximately $18,984 25,000 minus left-bracket (100 minus 15) (5) Right-bracket, or approximately $24,575.

Answer 1

Depreciation is an accounting method for allocating the cost of a tangible or physical asset over its usable life. Depreciation is a term used to describe how much of an asset's worth has been used.

Given:

Initial value of the Car = 25,000

Depreciation of the Car= 15% per annum based on net book value

The computation:

Note: t = Number of years

$\text{Net book value} = 25,000 (1 - 0.15)^t$

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

As a result, the car's approximate value 5 years after purchase is 11,092.50.

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