Please note that the answers for the \"Third year depreciation\" and the \"Third
ID: 2832411 • Letter: P
Question
Please note that the answers for the "Third year depreciation" and the "Third year repair cost" should be exact numbers. Thanks!
You are deciding whether to buy a new car or two-year-old car (of the same make). Your decision will be based on which car will have cost you less when you resell it at the end of three years. Your cost consists of two parts: the loss in value of the car and repairs. A new car costs $25000 and loses 12% of its value each year. Repairs are $200 the first year and increase by 15% each subsequent year.Explanation / Answer
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a) First year deprecation = 25000*0.12 = $ 3000
Value after first year = 25000 - 3000 = $ 22000
Second year deprecation = 22000 * 0.12 = $ 2640
Value after second year = 22000 - 2640 = $ 19360
Third year deprecation: 19360 * 0.12 = $ 2323.20
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d(n) = 25000(1 - 0.12)^(n-1) * 0.12
= 25000(0.88)^(n-1) * 0.12
= 3000 * (0.88)^(n-1)
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b) First year repair cost = $ 200
Second year repair cost = 200 * (1 + 0.15) = 200*1.15 = $ 230
Third year repair cost = 230 * (1 + 0.15) = $ 264.50
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r(n) = 200 * (1 + 0.15)^(n-1)
= 200 * (1.15)^(n-1)
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