Question

4 Question 1 5 Tara just bought her first car in order to commute to college, a used 2014 Toyota RAV4! The value of the car today is $13,000, but will lose 11% of it's value each year for the next several years. Down the road, Tara will trade the RAV4 in for a down payment on a newer car. If she trades in her car 4 years from now, how much will it be worth?

Answer 1

After 4 years can will be worth $8156.46

What is depreciation?

• The expense of using a tangible item and the benefit received over the course of its useful life are linked through depreciation.
• Depreciation can take many forms, including accelerated and straight-line depreciation.
• The whole amount of depreciation recorded on an asset up until a certain date is referred to as accumulated depreciation.
• A balance sheet asset's carrying value is its previous cost less all amassed depreciation.
• Salvage value is the carrying value of an item after all deductions for depreciation have been made.

Value of car today = $ 13,000

Depreciation rate = 11% each year

Time = 4 years

To calculate the worth of the car if Tara sells at the end of 4 years from now

[Future value = (value of present)(1- depreciation)

Thus, the value of the car at the end of 4 years can be calculated as

Value at the end of 4 years =

Present value *$(1-\frac{D_{1} }{100} )(1-\frac{D_{2} }{100} )(1-\frac{D_{3} }{100} )(1-\frac{D_{4} }{100} )$

where $D_{1} ,D_{2}, D_{3} , and D_{4}$ are successive depreciation rates

Value at the end of 4 years= $13,000*(1-\frac{11}{100} )*(1-\frac{11}{100} )*(1-\frac{11}{100} )*(1-\frac{11}{100} )$

$13,000*(1-\frac{11}{100} )^{4}$

=$ 13,000×0.62742

=$8156.46

Therefore, After 4 years can will be worth $8156.46

To learn more about depreciation, refer to

https://brainly.com/question/25785586

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