00:01
So we're told that a company purchased a machine for $50 ,000 and it's going to depreciate by 15 % each year.
00:07
So we want to know the value of this machine after each of the first six years.
00:15
So let's think about it.
00:16
If it's depreciating by 15%, what value of it does it hold? well, 100 % minus 15 % would be 85%.
00:26
And 85 % as a decimal is 0 .85.
00:30
So we simply have to find or to find the new value of the machine at the end of each year, find the value at the beginning of the year, and multiply it by 0 .85.
00:40
So at the end of the first year, it started at a value of $50 ,000, but it's going to now only keep on 85 % of its value.
00:50
So we're going to multiply 50 ,000 by 0 .85, which is equal to $42 ,500.
00:58
So that's the value of the machine after one year.
01:02
To find the value of the machine after the second year, we're going to take the 42 ,500, and we're going to multiply this by 0 .85, because that will tell us the value its worth at the end of the second year, which is 36 ,125.
01:18
And we're going to continue this process for the first six years.
01:22
So now we're going to multiply 36 ,125 by .85, which is going to equal to 30 ,706 .25.
01:36
Then we're going to do this again...