Question

Your parents car initially costs $18,000 and it depreciates at a rate of 12% a year. How much will the car be worth after 5 years.

Using this equation, when your parents give you the car when the value drops below $2,000, in what year of depreciation will you become the owner?

Answer 1

Explanation:

value after five years = $18,000×(1-0.12)⁵ = 18,000×0.88⁵ = $9,499.17

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The value drops below $2,000 in the 17th year.