Question

Dylan purchased a new car in 1993 for $26,300. The value of the car has been depreciating exponentially at a constant rate. If the value of the car was $2,700 in the year 2001, then what would be the predicted value of the car in the year 2006, to the nearest dollar?

Answer 1

The predicted value of the car in the year 2006 to the nearest dollar would be  $651.

What is the predicted value of the car?

The first step is to determine the rate of depreciation

g = (FV/PV)^(1/n) - 1

Where:

FV = value of the car in 2001

PV = value of the car in 1993

n = number ofyears = 8

(2700/26,300)^(1/8) - 1  = -24.76%

Now determine the value of the car in 2006

2700x ( 1 - 0.2476)^5 = $651

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