Question

Question 16 (1 point)

A car depreciates at a rate of 6%. Lisa purchased a car for $23,000. Using the
appropriate decay factor how much should it be worth 10 years after Lisa
purchased it?

Answer 1

After 10 years that Lisa has bought the car, her car will have an approximate value of:

• $12388.15

Explanation:

As you can identify in the exercise, every time a year passes, the value of the car has a decrease of 6% of its value that year, so what you should do is take the initial value of $23,000 and multiply it by 94% (the remaining value of its price), then take this result and multiply it by 94% and so on 10 occasions (since they are ten years of depreciation) as I show you below:

1. Value after depreciation = 23,000 * 94% = 21,620
2. Value after depreciation = 21,620 * 94% = 20,322.8
3. Value after depreciation = 20,322.8 * 94% = 19,103,432
4. Value after depreciation = 19,103,432 * 94% = 17,957,226
5. Value after depreciation = 17,957,226 * 94% = 16,879,793
6. Value after depreciation = 16,879,793 * 94% = 15,867,005
7. Value after depreciation = 15,867,005 * 94% = 14,914,985
8. Value after depreciation = 14,914,985 * 94% = 14,020,086
9. Value after depreciation = 14,020,086 * 94% = 13,178,880
10. Value after depreciation = 13,178,880 * 94% = 12,388,148

Therefore, it would have a value of approximately $12,388.15 after ten years of its purchase.