Suppose that you have just purchased a car for $40,000. Historically, the car depreciates by 8% each year, so that next year the car is worth $40000(.92). What will the value of the car be after you have owned it for three years?
Book Value B(t) at time t is B(t) = 40,000(1-0.08)^t or B(t) = 40,000(0.92)^t
At t = 3 we have:
B(3) = 40,000(0.92)^3
B(3) = 40,000 * 0.778688
B(3) = 31,147.52
Book Value B(t) at time t is B(t) = 40,000(1-0.08)^t or B(t) = 40,000(0.92)^t
At t = 3 we have:
B(3) = 40,000(0.92)^3
B(3) = 40,000 * 0.778688
B(3) = 31,147.52