Depreciate
Consider a brand new cellphone is purchased for $1,200. If the straight line depreciation is $9 every month, what is the expected salvage value in dollars after four years?
Expand Hint
The straight line depreciation formula is:
$$$D_{j}=\frac{C-S_{n}}{n}$$$
where
$$C$$
is the initial cost,
$$n$$
is the life span, and
$$S_n$$
is the expected salvage value in year
$$n$$
.
Hint 2
Convert either the depreciation to dollars per year, or the 4 years to months.
The straight line depreciation formula is:
$$$D_{j}=\frac{C-S_{n}}{n}$$$
where
$$C$$
is the initial cost,
$$n$$
is the life span, and
$$S_n$$
is the expected salvage value in year
$$n$$
.
Before solving for the initial cost, let’s convert the 4 years to months (or converting the depreciation to dollars per year works as well).
$$$4\:yr\cdot \frac{12\:months}{1\:yr}=48\:months$$$
Thus,
$$$\$9/month=\frac{\$1,200-S_n}{48\:months}$$$
$$$S_n=\$1,200-[\frac{\$9}{month}\cdot (48\:month)]=\$1,200-\$432=\$768$$$
$768
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Similar Problems from FE Sub Section: Straight Line
143. Straight Line Depreciation
441. Depreciation
Similar Problems from FE Section: Depreciation
143. Straight Line Depreciation
441. Depreciation