Answer:
£ 253,484.16
Step-by-step explanation:
Cost of house for first year = £235,000
<u>Year 1</u>
Depreciation for first year is 4% = 4/100
Depreciation in £ = 235,000 x 4/100 = £9,400
Effective value of house at end of first year
= 235000 - 9400 = £225,600
<u>Year 2</u>
In the second year the house value increased by 6% = 6/100
So total increase in £ at the end of year 2 with an initial value of £225,600 = £225,600 x 6/100 = £13,536
So actual value of house at end of year 2
= £225,600 + £13,536
= £239,136
<u>Year 3</u>
The value increased by 6% for year 3.
Value at beginning of year 3 = £239,136
Increase in value at 6% = £239,136 x 6/100 = £14,348.16
Total Value at end of year 3
= £239,136 + £14,348.16
= £253,484.16
Answer: £253,484.16
Note
Another way of quickly calculating this is noting that 4% depreciation means the new value is (1 - 4%) of initial value = 1 - 4/100 = 0.96
An increase of 6% means the new value will be 1.06 times the initial value
So the value of the house after 4% depreciation for the first year and 6% appreciation for the next 2 years
= 235000 x (0.96)(1.06)(1.06) = 253,484.16
