Depreciation Calculation for a Used Vehicle

How much will a used vehicle worth in 2 years?

If the initial value of the car is $4000, and the salvage value is $400, If the car is expected to have a useful life of another 6 years, how much will it be worth in 2 years?
A. $600
B. $2800
C. $1000
D. $3200

Answer:

The used vehicle will be worth $2800 in 2 years.

Depreciation is the reduction in value of an asset over time. In this case, the depreciation of the used vehicle is calculated using the straight-line method. The formula for depreciation is:

Depreciation = (Initial Value - Salvage Value) / Useful Life

Given that the initial value of the car is $4000, the salvage value is $400, and the useful life is 6 years, we can plug the values into the formula to find the depreciation for each year:

Depreciation = ($4000 - $400) / 6 years

Depreciation = $3600 / 6 years

Depreciation = $600 per year

Therefore, in 2 years, the used vehicle will be worth $4000 - ($600 x 2) = $4000 - $1200 = $2800.

It is important to understand depreciation calculations to determine the value of assets over time and make informed financial decisions.