Question

Farmer buys a tractor for $50000. If the tractor depreciates 10% per year, find the value of the tractor in 7 years. Round to the nearest penny.

Answer 1

If it depreciates by 10% every year, that means that the tractor is (100-10)=90% of its value in the previous year. Since 90%=0.9 (by moving the decimal 2 spots to the left), we multiply 50,000 by 0.9 the first year to get the second year's value, and that by 0.9, and so on. This can be shown by 50,000*(0.9)^t where t is the time in years. Plugging 7 in for t, we get 50000*(0.9)^7=Approximately 23914.85 dollars