A car is purchased for $19000. After each year, the resale value decreases by 30% . What will the re

Discussion in 'Calculator Requests' started by math_celebrity, Nov 25, 2019.

  1. math_celebrity

    math_celebrity Administrator Staff Member

    A car is purchased for $19000. After each year, the resale value decreases by 30% . What will the resale value be after 4 years?

    Set up a book value function B(t) where t is the number of years after purchase date. If an asset decreases by 30%, we subtract it from the original 100% of the starting value at time t:
    B(t) = 19,000(1-0.3)^t

    Simplifying this, we get:
    B(t) = 19,000(0.7)^t <-- If an asset decreases by 30%, it keeps 70% of it's value from the prior period

    The problem asks for B(4):
    B(4) = 19,000(0.7)^4
    B(4) = 19,000(0.2401)
    B(4) = 4,561.90
     

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