Question

joe buys a new boat for $45000. It depreciates 23% a year. How much will the boat be worth after 5 years? Which of the following formulas is appropriate to use for this situation ?

Answer 1

a)$12180.53

b)A=P(1-r)^n

Explanation:

The formula for depreciation to use is this case is;

A=P(1-r)^n

where

A=value of boat after 5 years

P=current value of boat = $45000

r=rate of depreciation= 23% =0.23

n=time span after the boat was boat= 5 yrs

Applying the formula

A=$45000(1-0.23)^5

A=$45000(0.77)^5

A=$12180.53