Question

the price of a car depriciates at 25% for 1st year and 20% for subsequent year. the price after three year is 115000 find the present value

Answer 1

Answer:

Present value is 239583.33

Hope this helps!

Step-by-step explanation:

Let p be the present value.

After 1 year, because of depreciation of 25%, its value will be

75% of p = 0.75 × p

After a second year, because of depreciation of 20%, its value will be

80% of (0.75 × p) = 0.8 × 0.75 × p = 0.6 × p

After a third year, because of depreciation of 20%, its value will be

80% of (0.6 × p) = 0.8 × 0.6 × p = 0.48 × p

We are told that its value will be 115000, so

0.48 × p = 115000

=> p = 115000 / 0.48 = 239583.33