Formula Problem

Question

A car purchased for $12,000 (O) depreciates 10% (P) for a year (Y). If the car is sold in 3 years, what is its depreciated value if V=O-POY?

 

Confused with working this problem. Any help would be appreciated!

Answer 1

Using your equation, V=O-POY..

Let's see what we have and what we need

O=12,000

P=0.10 (this is the same as 10%, just as 0.50=50% or 1.00=100%)

Y=3

Now, all we have to do is plug in the numbers which looks like this : V=(12,000)-(0.10)x(12,000)x(3)

Solve for V.

 

Answer 2

If you paid 12,000$ for the car and it depreciates 10% after the first year it's now worth 12,000-.1*12,000 or 12,000(1-.1) for the second year it's worth 12,000*(1-.1)² and for the third it's 12,000*(1-.1)³ so now interns of O and P and Y we have

 

Depreciated value =O*(1-P)^y  make sense?

 

Jim

Answer 3

The initial value of the car is $1200. The car depreciates 10% each year. In other words, the car retains 90% of its value. So it's depreciated value or DV=1200 (0.9)^3. In general terms DV=IV(1-P)^Y, where IV is initial value, P is percent depreciation expressed as a decimal, and Y is the number of years.