Question 104951: Value of car 2 yrs after it was bought = 14300, 4 yrs = 10200, what is depreciation rate? Is 2050 right and how do you find the yrs it will take to reach 0 value. I tried but now I am stuck. Please help if you will, and thanks again for the help!!!
Answer by Fombitz(32388)   (Show Source):
You can put this solution on YOUR website! The assumption is that the depreciation rate is linear.
2 yrs after = $14,300
4 yrs after = $10,200
Depreciation Rate = DR
DR=(Value(2)-Value(1))/(Time(2)-Time(1))
DR = ($10200-$14300)/(4-2)yr
DR = -$2050/yr.
The negative rate means that you lose value as time goes on, that is, depreciates.
If you look at the DR equation, it looks like a slope calculation.
In fact, the rate is the slope of the value function, V(t).
Let's find the intercept.
At 2 years,
At t=0 years, the car is brand new and its value was $18,400.
When V(t)=0, what will t be?
t=8.97 years, almost 9 years old.
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