Question

A property is purchased for $836,500. The owner of the property estimates that the property will be in use for 15 years. If the property is also estimated to lose 6% of its value each year, what will be the value of the property after 15 years?

(Value x Rate of Depreciation = Annual Depreciation)
(Annual Depreciation x Economic Life = Total Accumulated Depreciation)
(Purchase Value - Future Value = Total Accumulated Depreciation)

Answer 1

The value of the property after 15 years will be $83,650.

Step-by-step explanation:

To find the value of the property after 15 years, we can use the formula:

Future Value = Purchase Value - Total Accumulated Depreciation

First, let's calculate the annual depreciation:

Annual Depreciation = Value x Rate of Depreciation = $836,500 x 6% = $50,190

Next, let's find the total accumulated depreciation:

Total Accumulated Depreciation = Annual Depreciation x Economic Life = $50,190 x 15 = $752,850

Finally, we can calculate the future value of the property:

Future Value = Purchase Value - Total Accumulated Depreciation = $836,500 - $752,850 = $83,650

So, the value of the property after 15 years will be $83,650.