Question

A car is purchased for $21,500. After each year, the resale value decreases by 25%. What will the resale value be after 5 years?

Answer 1

$5,102.05

Explanation:

Present value of the car = $21,500

Present percentage value = 100% = 1

Percentage of Depreciation per year = 25% = 0.25

Years of depreciation = 5 years

The value of the car after 5 years = Present value of the car (Present percentage value - Percentage of Depreciation per year)^Years of depreciation

= 21,500(1 - 0.25)^5

= 21,500(0.75)^5

= 21,500(0.2373046875)

= 5,102.05078125

Approximately,

The value of the car after 5 years = $5,102.05