Question

What is the value, after 7 years, of a 2014 Ford Mustang that originally costs $25,000.00 if it depreciates at a rate of 8% per year? Round your answer to the nearest thousand dollars.

Answer 1

The value would be $14,000.

The formula we use for this is

A = p(1+r)ˣ, where p is the initial value, r is the percent of depreciation (as a decimal number) and x is the number of years. Note that since it is depreciation, r will be a negative number.

A = 25000(1-0.08)⁷ = 13946.17 ≈ 14000