Items such as automobiles are subject to accelerated depreciation whereby they lose more of their value faster than they do under linear depreciation. Assume a car worth $10,000 with a lifetime of 10 years with no salvage value,

(a) Using a solid line, draw a graph of the value V(t) of a car under accelerated depreciation and

(b) using a dotted line show the value of the same car under straightline depreciation, given

(a) V(t) = 100t2 – 2000t + 10,000

(b) V(t) = 10,000 – 1000t

Note how at t = 5, the value of the car is S5000 under linear depreciation but only $2500 under accelerated depreciation.

Transcribed Image Text:

t 0 2 58 8 5 V 10,000 6,400 2,500 400