Question

If you spend $50,000 on new furniture and it is depreciating about 20% per year, how much will it be worth by its third year?

Answer 1

$25,600

Explanation:

• Given: P = $50,000, r = 20% & t = 3 years

• Formula for depreciation is given as:

• 
  `A(t) = P\bigg(1-(r)/(100)\bigg)^t`

• Plugging the values of P, r and t in the above formula, we find:

• 
  `A(3) = 50,000\bigg(1-(20)/(100)\bigg)^3`

• 
  `\implies A(3) = 50,000\bigg(1-(1)/(5)\bigg)^3`

• 
  `\implies A(3) = 50,000\bigg((4)/(5)\bigg)^3`

• 
  `\implies A(3) = 50,000*(64)/(125)`

• 
  `\implies A(3) =\$ 25,600`

• So, after third year it will be worth by $25,600.