Question

The manufacturer's suggested retail price (MSRP) for a particular car is $24,705, and it is expected to be worth $13,905 in 4 years. (a) Find a linear depreciation function for this car. (b) Estimate the value of the car 7 years from now. At what rate is the car depreciating? (a) What is the linear depreciation function for this car?

Answer 1

Price P = 24,705 - KT = 13,905

then find K

K= (24,705 - 13,905)/4 = 10,800/4 = 2,700

a) Linear depreciation function

P= 24,705 - 2,700•T

b) Value of car in 7 years

P = 24,705 - 2700•7 = 24,705 - 18900= $5805 dollars

Car is depreciating at rate of

minus 2,700 dollars, per year