Question

Find the value of a machine at the end of 4 years if the original cost was $1038 and r=0.28. Round to two decimal places.

Answer 1

We have a value function of a machine at the end of the year t that is:

`V=C(1-r)^t`

We know that C = 1038 and r = 0.28.

We have to calcula the value of the machine after 4 years (t = 4).

Then, we replace the parameters with their values and calculate V as:

`\begin{gathered} V(t)=C(1-r)^t \\ V(4)=1038\cdot(1-0.28)^4 \\ V(4)=1038\cdot0.72^4 \\ V(4)=1038\cdot0.26873856 \\ V(4)\approx278.95 \end{gathered}`

Answer: the value is $278.95.