Question

A truck depreciates at 45%, and a Jeep depreciates at 25% per year. Assume the initial purchase price is $19,000 and the total cost of ownership is $38,000. Use a spreadsheet to determine how much more the Jeep is worth in three years.

A. $6,312.50
B. $7,125.00
C. $8,437.50
D. $9,250.00

Answer 1

To determine how much more the Jeep is worth in three years, subtract the total depreciation of the Jeep from the total depreciation of the truck. The answer is $13,315.62.

Step-by-step explanation:

To determine how much more the Jeep is worth in three years, we will calculate the depreciation value for both the truck and the Jeep over the three-year period.

For the truck:

• Year 1: depreciation = 45000 * 0.45 = $8,100
• Year 2: depreciation = 45000 * 0.45 = $8,100
• Year 3: depreciation = 45000 * 0.45 = $8,100

Total depreciation for the truck over three years = $8,100 + $8,100 + $8,100 = $24,300.

For the Jeep:

• Year 1: depreciation = 19000 * 0.25 = $4,750
• Year 2: depreciation = (19000 - 4750) * 0.25 = $3,562.50
• Year 3: depreciation = (19000 - 4750 - 3562.50) * 0.25 = $2,671.88

Total depreciation for the Jeep over three years = $4,750 + $3,562.50 + $2,671.88 = $10,984.38.

To determine how much more the Jeep is worth in three years, we subtract the total depreciation of the Jeep from the total depreciation of the truck: $24,300 - $10,984.38 = $13,315.62.

Therefore, the Jeep is worth $13,315.62 more than the truck in three years.