Question

A car costs £5000 when new. Each year the value decreases by 20%. Person A said that the car would be worth nothing in 5 years. The answer is not 0. What is the answer? Why is Person A wrong?

Answer 1

£1638.40

Explanation:

Step one:

Given data

A car costs £5000 when new

Each year the value decreases by 20%.

Step two:

let us compute the worth in the next 5 years

year 1

worth= 5000- 0.2*5000

worth= 5000-1000

worth= £4000

year 2

worth= 4000- 0.2*4000

worth= 4000-800

worth= £3200

year 3

worth= 3200- 0.2*3200

worth= 3200-640

worth= £2560

year 4

worth= 2560- 0.2*2560

worth= 2560-512

worth= £2048

year 5

worth= 2048- 0.2*2048

worth= 2048-409.6

worth= £1638.40

The person is wrong because after 5 years the car is worth £1638.40