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Joe Arcikoski's duplex depreciates 3% per year for 5 years. Since the building originally cost $20,000, what is the current value of the duplex?

A. $17,450
B. $18,400
C. $18,600
D. $19,250

User Dfreeman
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1 Answer

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Final answer:

To find the current value after depreciation, we use the formula for exponential depreciation, which in this case equals approximately $17,135.55. The best estimate among the provided choices is $17,450 (Option A).

Step-by-step explanation:

The question relates to thebing's value over time. To calculate the current value of Joe Arcikoski's duplex after it depreciates 3% per year for 5 years given that the original cost was $20,000, we apply the formula for exponential depreciation:

Current Value = Original Value × (1 - depreciation rate)^number of years

Plugging in the values:

Current Value = $20,000 × (1 - 0.03)^5

Current Value = $20,000 × (0.97)^5

Current Value = $20,000 × 0.85673

Current Value = $17,135.55

The closest value to $17,135.55 from the given options is $17,450, which suggests a slight difference due to rounding at some step not shown here. Therefore, answer choice A would be the best estimate based on the provided options.

User Nesrin
by
8.3k points
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