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The value of a new truck decreases by 5%upon taking ownership. After that, the value of the truck decreases by 6.5% each year. If the truck is initially valued at $25,000, how much will its value be after 7 years of ownership?

Respuesta :

TheAakash
First, the truck loses 5% of its value. We can write this as:
[tex]V_t = 25000- (0.05(25000)) = 23750 [/tex]

Now, the car costs $23750. After we use it for 7 years, then, we can write the following:
[tex]V_c = (1-0.065)(23750)^7 = 14836.96[/tex]

So, it currently costs $14836.96. 
Initial Value = $25000
Upon taking over:
Value = 25 000 - (5% x 25 000)
value = 25 000 - (0.05 x 25 000)
value = 25 000 - 1250 = $23 750

value after next 7 years compounded = 
23750 (1 - 0.065)^7 = $14836.96