Question

find the value of an IBM mainframe computer after 5 years if the initial value was $1,250,000 and the computer is depreciating at a rate of 17.5% a year. show the formula you use

Answer 1

The value of an IBM mainframe computer after 5 years, originally worth $1,250,000 and depreciating at 17.5% per year, is calculated to be $552,500 using the compound interest depreciation formula.

Step-by-step explanation:

To find the value of an IBM mainframe computer after 5 years given that it depreciates at a rate of 17.5% per year, we need to apply the formula for depreciation using the compound interest formula:

Final Value = Initial Value × (1 - Depreciation Rate)Number of Years

Let's plug in the values:

• Initial Value = $1,250,000
• Depreciation Rate = 17.5% or 0.175
• Number of Years = 5

So the calculation will be:

Final Value = $1,250,000 × (1 - 0.175)5

Calculating the above, we get:

Final Value = $1,250,000 × (0.825)5

Final Value = $1,250,000 × 0.442

Final Value = $552,500

Therefore, the value of the IBM mainframe computer after 5 years is $552,500.