Marlin Davies buys a truck for $28,000. In three years, the truck depreciates 48% in value. How much is the truck worth in three years
The correct answer and explanation is:
Answer:
The truck is worth $14,560 after three years.
Explanation:
When an asset like a truck depreciates, it loses value over time. Depreciation is often expressed as a percentage of the original value.
Here, Marlin Davies bought a truck for $28,000, and after three years, it has depreciated by 48%. This means the truck has lost 48% of its value over those three years.
Step 1: Calculate the amount of depreciation
Depreciation amount = Original price × Depreciation rate
= $28,000 × 48%
= $28,000 × 0.48
= $13,440
Step 2: Calculate the remaining value
Value after depreciation = Original price – Depreciation amount
= $28,000 – $13,440
= $14,560
Detailed Explanation:
Depreciation reduces the value of assets such as vehicles, machinery, or equipment over time due to wear and tear, aging, or obsolescence. The percentage depreciation tells us how much of the original value is lost.
Here, a 48% depreciation means that almost half of the truck’s value has been lost over three years.
This type of problem is a basic example of applying percentage decrease to an initial amount. The formula for the remaining value after depreciation is: Remaining Value=Original Value×(1−Depreciation Rate)\text{Remaining Value} = \text{Original Value} \times (1 – \text{Depreciation Rate})
Plugging in the values: =28,000×(1−0.48)=28,000×0.52=14,560= 28,000 \times (1 – 0.48) = 28,000 \times 0.52 = 14,560
So, the truck is worth 52% of its original value after three years.
This concept is important in accounting, finance, and everyday decision-making because knowing how much an asset will be worth after some time helps with budgeting, selling, or replacing items.