Question

A $60,000 piece of machinery depreciates (decreases) in value at a rate of 11% per year. What will its approximate value be in 5 years? Round your answer to the nearest cent.

A) $43,140.00
B) $35,440.00
C) $54,600.00
D) $46,200.00

Answer 1

To find the approximate value of the machinery after 5 years, we can use the formula for compound interest. Substituting the given values into the formula, the approximate value is $37,338.

Step-by-step explanation:

To find the value of the machinery after 5 years, we can use the formula for compound interest:

P = P0(1 - r)t

Where P is the final value, P0 is the initial value, r is the rate of decrease (in decimal form), and t is the number of years.

In this case, P0 is $60,000, r is 0.11, and t is 5.

Substituting these values into the formula:

P = $60,000(1 - 0.11)5

Simplifying the calculation:

P = $60,000(0.89)5

P ≈ $60,000(0.6223)

P ≈ $37,338

Therefore, the approximate value of the machinery after 5 years is $37,338.