Suppose a radio costs $575 when new and is expected to be worth $70 after 5 years. What will it be worth after 3 years?

Question

Suppose a radio costs $575 when new and is expected to be worth $70 after 5 years. What will it be worth after 3 years?

Answer 1

The answer to this question depends on whether you model the depreciation as a linear function or as an exponential function.  I will show you how to do the linear function, because it's easier and the numbers work out nicer.  If you need the exponential version then repost the question with the words exponential decay in the question.  

 

Initial value = $575

Value after 5 years = $70

 

Change in value after 5 years = $575 - $70 = $505

 

Change in value per year = $505 / (5 years) = $101 per year

 

So after 3 years the value will have decreased by 3*$101 = $303

 

So worth after 3 years = $575 - $303 = $272